Brother replaces brother at Gulf Bank
Moody’s warned it could downgrade the bank, the country’s second biggest lender.CPIFinancial has more on the possible downgrade:
Kutayba Al Ghanim replaced his brother Bassam Al Ghanim as chairman of Gulf Bank after depositors on Monday started to withdraw deposits from the stricken bank. It was the first known bank run in the region during the crisis and came despite the Kuwaiti central bank’s pledge to support the bank and guarantee all bank deposits in the country.
Abu Dhabi Commercial Bank in the United Arab Emirates and Gulf International Bank and Arab Banking Corporation in Bahrain last year reported writedowns on US investments.
Few other institutions have admitted to subprime losses, but many have started to take mark-to-market losses on investment portfolios due to plunging regional and international equities. The MSCI Gulf index has lost nearly half its value this year.
Moody's says the losses sustained by the bank appear to have involved complex instruments. The agency said, “This therefore raises questions as to whether the underlying risks assumed by customers, and by extension by the bank, were properly identified and managed.”
The bank's announcement of the unexpected losses resulted in a run on customer deposits, which prompted the Kuwaiti authorities to guarantee deposits not only in Gulf Bank but in all of the country's banks.
Although the run appears to have been modest in absolute figures, Moody's notes that it represented a flight of retail customer funds that could have a longer-term impact on the bank's business franchise.