Press Releases

H.E. the Governor of the Central Bank of Kuwait (CBK), Sheikh Salem Abdulaziz Al-Sabah, stated that the CBK Board of Directors held a meeting on Sunday the 16th of November 2008. The Board discussed measures to strengthen shareholders' equity at the Gulf Bank, in view of the results of the external auditors report assigned to carry out an audit of the bank as of end October 2008, in order to determine the magnitude of the loss suffered by the Gulf Bank following the declaration on 26 October 2008 that the bank suffered a loss as a result of its trading in financial derivatives on behalf of its clients.

H.E. the Governor stated that the external auditors report revealed that the total loss of the bank amounted to KD 375 million, which include losses of the bank from trading in financial derivatives on behalf of its customers, trading in other financial investment instruments, and the portfolio provisions of both loans and investments.

H.E. the Governor also pointed out that the CBK Board of Directors decided that the Gulf Bank boost its shareholders equity back to its level at end of September 2008.

The CBK Board of Directors discussed the measures taken to assist the Gulf Bank to overcome the crisis, and the proposed means to consolidate the shareholders equity, which were discussed earlier in meetings held with the Chairman and members of the Board of Directors of the Gulf Bank.

H.E. the Governor explained that the CBK Board of Directors decided to ask the Gulf Bank management to immediately initiate necessary measures to increase the bank capital in order to raise shareholders equity by KD 375 million to bring it back to its September 2008 level, whereas current shareholders shall have priority in subscription of the new shares on pro rata basis, and the Kuwait Investment Authority (KIA) shall be entitled to take up shares not subscribed to by bank shareholders, and that the Gulf Bank should promptly take necessary measures to hold a regular and extraordinary general assembly meeting to implement the decision.

H.E. the Governor stated that in view of these decisions by the CBK Board of Directors, a meeting was held in the CBK premises on Monday 17 October 2008 attended by the Chairman and members of the Gulf Bank Board of Directors, who were given directions to immediately start the implementation of these decisions.

Furthermore, H.E. the Governor stated that on the evening of the same day the CBK received confirmation from the Gulf Bank that it started implementation of the decision to increase capital by calling a regular and extraordinary general assembly meeting for this purpose.

On the other hand, H.E. the Governor indicated that CBK was also informed that the Gulf Bank Board of Directors have resigned effective from the completion of capital increase process. A regular general assembly meeting will then be held to elect a new board.

Finally, H.E. the Governor explained that the Gulf Bank, by implementing these decisions, will restore shareholders equity to its prior position, and the bank will regain its credibility and the trust of local and foreign clients, and thus return to its pre-crisis level of activities.

H.E. the Governor indicated that the set of measures taken by CBK since day one of the Gulf Bank crisis fall in the context of CBK endeavors to ensure that the Kuwaiti banking system continue to have the good reputation it has in local and international markets.