Kuwait sought to restore confidence in its banking system on Monday by offering to pump cash into troubled Gulf Bank which has been hit by losses from derivative deals.
A group of investors meanwhile protested in Kuwait City's financial district against the government's handling of the global financial crisis and urged the cabinet to resign.
Figures released on Monday showed inflation in July remained above 11 percent for the Gulf Arab oil exporter, ratcheting up pressure on the government to do more to soften the impact of the global crisis on ordinary citizens and small investors.
Kuwait's central bank stepped in to save the fifth-largest lender Gulf Bank on Sunday, appointing a supervisor for its treasury business after the lender was hit by losses from currency derivative trades.
Central Bank Governor Sheikh Salem Abdul-Aziz said Gulf Bank depositors did not need to worry as the central was ready to provide the necessary liquidity and the government was preparing an urgent bill to guarantee deposits at all banks.
"The central bank is ready to pump the necessary liquidity into Gulf Bank in case money is needed to tackle any withdrawal of deposits," Sheikh Salem told state news agency KUNA.
Gulf Bank said it had seen some deposit withdrawals but not in significant amounts. "The central bank fully stands beside us … Things will calm down," General Manager for Board Affairs Fawzy al-Thunayan told Reuters.
Asked about clients lining up outside the bank's headquarters after news of the trouble on Sunday, Thunayan said: "It's (the) time of salaries … It's the end of the month."
Fawzy declined to say how much money had been withdrawn or what measures the central bank had taken so far. There was no crowd outside the bank's headquarters on Monday.
"There is no specific pumping into the bank yet," Fawzy said, when asked about media reports that the central bank had injected a "huge" amount of money into the bank.
The Kuwaiti Banking Association said the sector was still in a solid position, adding that all lenders were ready to help Gulf Bank. It gave no concrete proposals.
PROTESTS
More than 60 investors protested outside the bourse building, opposite Gulf Bank in Kuwait City's financial district, demanding the government step down for failing to deal with the financial crisis as stocks continued to fall.
Investors later entered the bourse building and main trading floor, but trading on the Arab world's second-largest bourse was not interrupted, a spokesman for the Kuwait Stock Exchange said.
"I withdrew my money from the bank … there is no confidence in the stock market, or the bank, or the government," 60-year-old Abdullah al-Ajmi, an investor who lost 80,000 dinars on the bourse, shouted while flashing dinar banknotes. "We demand to overthrow the government."
Another angry investor reiterated demands that the government halt trading and help them cope with losses.
"Many other countries took such measures to protect investors … but the government is hiding something. We demand the government to tell the truth or leave," the protestor said.
The problems at Gulf Bank, which posted two straight quarterly profit declines, forced Kuwait to guarantee deposits at local banks on Sunday in an effort to restore confidence.
Gulf Bank's stock remains suspended until the central bank concludes an investigation into the derivatives losses.
Kuwait's cabinet has set up a committee led by Central Bank Governor Sheikh Salem Abdul-Aziz al-Sabah to tackle the impact of the crisis.
Daily al-Anbaa quoted banking sources as saying several Kuwaiti banks are considering merging to curb the impact of the global credit crisis by forming huge banking entities, adding that the central bank was studying four such requests.
Commercial Bank of Kuwait (CBK), the country's fourth largest lender by market value, meanwhile said it was not affected by the troubles of Gulf Bank.
