27 Oct 2008

Bail out for banks in Gulf

7:55 am on 27 October 2008

The global financial crisis is spreading to the Gulf region.

The central bank of Kuwait on Sunday moved to prop up one of its banks and Saudi Arabia extended $US2.7 billion in credit to a bank for low-income citizens.

The central bank was forced to step in to support Gulf Bank, which was hit by losses from trading in currency derivatives after the dollar rose, prompting the government to announce it would guarantee local bank deposits.

Gulf Bank shares are suspended on the stock market.

Saudi Arabia also announced plans to deposit 10 billion riyals ($US2.67 billion) into the Saudi Credit Bank, which was established to extend interest-free loans to low-income citizens in financial difficulties.

Gulf markets fell afterwards. Indexes in Qatar and Oman fell more than 8% while Dubai was down by 4.74%.

Saudi Arabia's index slipped 3.77% after an 8.7% slide on Saturday.

Gulf finance ministers and central bankers earlier held an emergency meetinmg in the Riyahd on Saturday, to coordinate the region's response to the global downturn.