10.40 PM Tuesday, 23 April 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:28 05:46 12:20 15:47 18:49 20:07
23 April 2024

Kuwaiti companies asked not to expect state help

Sheikh Salem Al Sabah (SUPPLIED)

By Reuters

Kuwaiti Central Bank Governor Sheikh Salem Al Sabah has urged investment firms to make their own plans to deal with the impact of the global credit crunch, rather than expecting help from the state.

The failure of an investment firm did not pose the same systematic risk as that of a bank and did not justify the sort of state aid extended last year to the Gulf country's fourth-largest lender, he told Al Arabiya television.

"It is also useful for us to see from investment companies plans to resolve their situation rather than leaving it to the state. They must present plans," he said.

"You are saying that if a company falls it will drag another down but the statements I have do not say this... When they are exposed to problems it is not the same as when banks are exposed to problems. The effects are completely different," he said.

Kuwait last year stepped in to rescue Gulf Bank after it was hit by derivatives losses. It also guaranteed deposits at all banks in a bid to boost confidence.

"Banks are different from investment companies. Bank balance sheets include deposits. Investment companies have no deposits," Sheikh Salem said.

The state has set up a market-maker fund to try to shore up confidence and liquidity in the bourse that has plummeted in recent months as the global financial crisis hit the Gulf.

The fund was not intended to prop up share prices, Sheikh Salem said.

The government has also faced demands to support troubled Kuwaiti investment firms, which make up more than half of the country's listed companies and offer typical investment banking services.

Analysts expect no general government bailout for investment firms, which they say had have borrowed heavily from local banks as they expanded rapidly during the boom that swept the Gulf in the hey-day of record oil prices.

Falling oil prices and a global slowdown have since put an end to the years of rapid economic expansion.