Kuwait's NBK, KFH deny derivatives trading

Kuwait’s NBK, KFH deny derivatives trading

Kuwait's biggest lenders National Bank of Kuwait and Kuwait Finance House denied on Sunday reports that they were putting customers' money at risk by trading in derivatives.

September 19, 2011 10:50 by Reuters

Kuwaiti daily newspaper al-Seyassah said on Saturday in a report, citing unnamed parliamentary and economic sources, that several lawmakers were planning to investigate derivatives trading by some banks. The trades took place away from the central bank’s supervision, it reported, and put clients’ deposits at risk.

“NBK does not engage in any derivative trading at all and has no exposure whatsoever to these instruments,” Kuwait’s biggest lender said in a statement on the bourse website on Sunday, reiterated by a similar statement by KFH.

NBK added that it applies international standards “in hedging against risks of interest and foreign currency fluctuations.”

“KFH is fully committed to the laws and regulations of the supervisory authorities and all the procedures governing banks, and has no dealings that violate or circumvent the supervision of the Central Bank of Kuwait,” the country’s biggest Islamic lender said in an emailed statement.

The paper added that the move by lawmakers was a “counter-attack” after some local banks leaked information about suspicious cash deposits in several parliamentarians’ accounts.

In 2008, shareholders in Kuwait’s Gulf Bank approved a rescue plan ordered by the central bank to raise 375 million kuwaiti dinars ($1.36 billion) in a 100 percent emergency rights issue to cover derivatives losses of the same amount.

Troubles of Gulf Bank, in which the country’s sovereign wealth fund owns a 16 percent stake, prompted the government to guarantee all deposits in local banks to restore confidence.

Gulf Bank was the only lender in the oil-rich region that had to be rescued by a government in the fallout from the global credit crisis. ($1 = 0.275 Kuwaiti Dinars) (Reporting by Eman Goma)