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The Kuwaiti government has approved a bill to guarantee deposits in local banks, the finance minister said on Tuesday, amid continued investor jitters about the emirate's financial system. "The council of ministers has approved the draft law for guaranteeing bank deposits. It will be sent to parliament for approval," Mustafa al-Shamali told reporters outside parliament.
It was not immediately known when the 50-member parliament will debate the bill. Shamali did not say when the cabinet made the decision, but the Kuwaiti government held its regular weekly meeting on Monday. The government of the oil-rich emirate has already pledged to guarantee deposits in banks after the Gulf Bank, the second largest lender, said on Sunday it incurred unspecified losses from derivatives deals abroad.
Central bank governor Sheikh Salem Abdulaziz al-Sabah said on Monday that no other local banks have faced problems from the derivatives deals. The central bank said on Sunday it sent in a supervisor and undertook to guarantee Gulf Bank's deposits after the derivatives deals went wrong because of a decline in the value of the euro against the dollar.
The losses will not "affect Gulf Bank's activities (nor) its ability to continue providing its normal banking services," the central bank added. There are seven commercial and three Islamic banks in the emirate. Deposits at the end of September stood at 22 billion dinars (82 billion dollars). Kuwait will be the third Gulf state to guarantee bank deposits. The United Arab Emirates and Saudi Arabia have made similar measures earlier this month.

Copyright Agence France-Presse, 2008

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