Kuwait banks may merge under rescue plan
Kuwait City, February 9, 2009
Kuwaiti banks or investment firms may have to merge if they want to obtain state help under a $5 billion rescue plan, a bill devised by the central bank said.
On Thursday, Kuwait's cabinet approved a stimulus package worth 1.5 billion dinars ($5.08 billion) including state guarantees of up to 50 percent for fresh loans banks provide to local firms.
Investment firms getting loans which are backed by state guarantees have to comply with the plan's rule that "the firm enter a merger with one or several firms if this is required," according to the detailed plan.
The same applies to banks if they want state guarantees for their investments and real estate holdings.
The plan was unveiled after several investment firms said they need fresh loans to weather the global credit crunch.
Global Investment House, Kuwait's biggest investment bank, said last month it had defaulted on most of its debt, while Islamic rival Investment Dar said in December it needed up to $1 billion in loans.
Under the plan, the central bank will also decide which investment firms will qualify for aid depending on whether the firm is able to continue its business and has a "good" solvency.
Central Bank Governor Sheikh Salem Abdul-Aziz said on Sunday he expected local banks to provide loans to companies worth up to 4 billion dinars this and next year of which Kuwait would guarantee 50 percent.
Kuwait will also guarantee half of all loans local banks would provide to investment firms to reschedule debt and 25 percent of those from foreign creditors, Sheikh Salem said, putting the total debt of local investment firms at 5 billion dinars. - Reuters