This year, Kuwaiti banks all seem relatively strong, despite huge losses at Gulf Bank last year in derivatives transactions, but the same cannot be said for the 100 or more investment companies which have suffered significantly under the impact of the global financial crisis. Although some of the banks have been broadening horizons outside Kuwait, success at home is likely to depend on uncertain domestic factors such as political stability since the May 16 elections, the success of the recent financial stabilisation law and its stimulative impact on investment companies and the banks.
Although banks suffered an outflow of foreign bank liquidity in 2008, the authorities have filled liquidity needs with a lowering of cash reserve requirements, overnight one-month repos and dollar swaps. But credit expansion has been cautious due to uncertainties over the fate of investment companies, political direction, stock market declines and the softening real estate market.
