Kuwait said on Monday that no other local banks have faced problems from the derivatives deals which caused the central bank to step into Gulf Bank, the country's second biggest lender. "No other Kuwaiti bank has incurred losses," from derivatives trades, Sheikh Salem Abdulaziz al-Sabah, governor of the Central Bank of Kuwait, was quoted as saying by the official KUNA news agency.
The governor reiterated "full backing and protection of all forms of deposits" for Gulf Bank, which was left with the derivatives losses when some clients defaulted. The scale of the problem remained unclear on Monday as the CBK's investigation continued.
However, Sheikh Salem also assured customers of the troubled bank that there is no cause for concern "since their deposits are completely safe." "The central bank is ready to pump the necessary liquidity into the Gulf Bank if it needs it to meet any withdrawal of deposits," Sheikh Salem said. He spoke after some customers withdrew cash from Gulf Bank. They were all allowed make withdrawals without any restrictions.
The CBK said on Sunday said 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.
The government of the oil-rich emirate pledged to guarantee deposits in all local banks and a draft law will be urgently submitted to parliament for approval. 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).