In an urgent development late yesterday, Central Bank governor Sheikh Salem Abdulaziz Al-Sabah, who is abroad, categorically denied rumors that two local banks have asked for protection after a slide on the bourse. Sheikh Salem stressed that all local banks enjoy a sound position and are facing no financial problems. The rumor was circulating in the Kuwait Stock Exchange (KSE) yesterday.The Central Bank earlier yesterday reiterated a pledge that it was prepared to inject fresh funds into the banking system "whenever necessary" as the government held a high-level economic discussion over the slide in the KSE. Most of the Cabinet's weekly meeting was devoted to discussing the market situation, as the KSE Index closed trading below the 12,000-point mark for the first time in about 16 months.The bourse has lost close to 900 points or about seven percent in the past two days, sending shockwaves among small investors who have lost heavily since the index reached its all-time high of 15,654 points on June 24. Besides the finance and commerce ministers, the Cabinet meeting was attended by director general of KSE Saleh Al-Falah, managing director of Kuwait Investment Authority (KIA) Bader Al-Saad and a senior official from the CBK.Following the meeting, the Cabinet said in a statement that the ministers of finance and commerce insisted that the Kuwaiti economy is sound and that there was no direct impact on the domestic economy by the global financial meltdown. The statement emphasized the strength of Kuwaiti banks and financial institutions and said that there was no shortage of liquidity, adding that there was enough cash for all sides to borrow from banks, but stressed the banks' right to select their clients.The statement also said that the Kuwaiti bourse has been the least affected in the Gulf region by the global financial turmoil. The statement said that the CBK has pledged to provide liquidity to any bank only when needed. CBK has reportedly pumped limited amounts of funds into the interbanking system, but economists have criticized the injection as insufficient. The bank pumped more cash into the banking system yesterday to boost liquidity and shore up confidence. Interbank lending rates fell for the second day after banks said the central bank offered more funds to lenders following a similar move on Sunday and last week.They offered funds again for banks who need funds," one banker at a local lender told Reuters, adding the central bank offered overnight and one-week funds. Another banker said one-month funds were also being offered. The volumes of funds offered were the same as in previous days, bankers added, without giving any further details. Al-Qabas said in an unsourced report the Kuwait Investment Authority (KIA), the Gulf Arab state's sovereign wealth fund, has offered to deposit about $55 million with local banks at an interest rate of more than 7 percent. This would be well above the current repo rate - used by banks for deposit interest rates - at 3.50 percent.In related developments, a number of MPs called on the government to intervene immediately to stop the sharp slide in the KSE index that began before the Eid Al-Fitr holidays. MP Adnan Abdulsamad held the ministers of finance and commerce and the bourse director responsible for what he called the "catastrophe" in the stock market and demanded intervention.MP Mohammad Al-Abduljader called on the government to intervene to rescue the national economy, saying that what is happening is not a decline in the bourse but an "economic collapse that may reach domestic banks". Also, Al-Rai TV reported that a group of lawyers will today sue the government and demand that trading on the bourse should be suspended.
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