KUWAIT CITY, (AFP) – Kuwait’s government will move urgently to guarantee deposits in local banks, the central bank said Sunday as the oil-rich emirate’s second largest lender was hit by the global financial crisis.
“The government will urgently submit a draft law (to parliament) to guarantee deposits in local banks,” said a statement by Central Bank of Kuwait (CBK) posted on the Kuwait Stock Exchange website.
The move came after the CBK announced that Gulf Bank, Kuwait’s second largest lender, incurred “losses” from trading in derivatives and immediately suspended its shares on the stock market.
The central bank said the losses would not affect the bank’s financial position and that it “backs the bank and fully guarantees its deposits.”
The losses were incurred because of a drop in the value of euro against the dollar, the central bank said but provided no details about the amounts.
The CBK has ordered a probe into the deals to determine their sizes and who was responsible for conducting them away from central bank supervision.
It however affirmed that the losses would not “affect the Gulf Bank activities and its ability to continue with providing its normal banking services.”
The CBK however decided to appoint a “supervisor” to monitor the bank’s management of treasury, dealings in forex and stock markets in order to strengthen internal controls.
It is the first time that a Kuwaiti bank is known to be affected by the global financial crisis.
Kuwait is the second Gulf state to decide to guarantee bank deposits after the United Arab Emirates made a similar step earlier this month.