Kuwaiti banks, firms may merge under rescue plan
Kuwaiti banks or investment firms may have to merge if they want to obtain state help under a $5 billion (Dh18bn) rescue plan, a bill devised by the central bank said.
On Thursday, the Gulf Arab state's cabinet approved a stimulus package worth 1.5 billion dinars ($5.08bn) including state guarantees of up to 50 per cent 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 $1bn 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 four billion dinars this and next year of which Kuwait would guarantee 50 per cent.
Kuwait will also guarantee half of all loans local banks would provide to investment companies to reschedule debt and 25 per cent of those from foreign creditors, Sheikh Salem said, putting the total debt of local investment firms at five billion dinars.
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