Kuwait's central bank plans to verify if individual banks have enough liquidity after recent declines in the local bourse and the global financial crisis raised concerns, banking sources said today. "We expect a letter from the central bank in one or two days. They just want to be on the safe side," a source at a local bank said. The central bank could not be immediately reached for comment but said on Monday it "will not hesitate" to provide liquidity to the banking system if necessary.
Interbank rates in Kuwait have almost doubled since the central bank in August withdrew a facility guaranteeing the availability of dinars at a fixed rate on the interbank market. The Kuwaiti stock exchange also fell sharply last week in line with other Gulf exchanges. The government has partly blamed a flurry of capital increases for sucking up liquidity. Kuwait's al-Qabas newspaper said in an unsourced report that the central bank wanted to check on bank liquidity after those stock market declines.
The move would come on the heels of an announcement by the UAE's central bank that it would launch a Dh50 billion funding facility to help banks cope with a global liquidity crunch. * Reuters
