Business as Unusual
By Clare Dunkley • Dec 11th, 2008The CBK also appointed a supervisor to investigate Gulf Bank’s internal control systems for treasury, foreign exchange and stock market operations, and rumors circulated that travel bans had been imposed on all directors pending investigation of the rogue dealings. Chairman Bassam al-Ghanem submitted his resignation on Oct. 28, but any impression of a wholesale clear-out of the parties presiding over the debacle was scotched by his replacement, his brother, Qutaiba al-Ghanem. The pre-eminence of al-Ghanem’s powerful merchant family, however, may be short-lived. The CBK pledged a cash injection for the bank of 400 million Kuwaiti dinars ($1.48 billion), should such funds be needed. The trade-off, however, is that the CBK claimed the right to appoint at least six members of Gulf Bank’s nine-member board.
Qutaiba al-Ghanem did not rule out a merger with market leader National Bank of Kuwait (NBK) in his first interview since assuming the post. But he denied knowledge of any formal talks, so far: “NBK wants to merge with us?” he replied to a reporter’s question. “That is news to me. But it is good news. I would not revoke that. I am willing to look at every offer and every possibility that will make the banking system stronger in Kuwait.”
Wait and see. NBK was circumspect in response, but certainly failed to deny the possibility outright: “The bank will aim during the coming period to study more acquisition opportunities in the region and abroad,” chairman Mohammad al-Bahar told Kuna on Nov. 3. “There are opportunities in the current circumstances that global markets are going through and they are good opportunities for NBK acquisition plans.”
NBK has a longstanding regional platform that includes Iraq, Qatar, Egypt and Turkey. It also aims to bring in half of its net profits from outside its home market by 2015. Yet it has rarely talked about domestic mergers. The strategy points to the far more cha-racteristic – and hence much maligned in some quarters – gradualist approach by the CBK to introduce a Shari’ah-compliant financial services industry. Although sector behemoth Kuwait Finance House (KFH) has been around since 1977, the bank was only formally brought under the regulatory umbrella in 2003 after the central bank issued laws that specifically govern the sector. Only two other Islamic licenses were up for grabs in the first wave, which were taken by Kuwait Real Estate Bank (which was renamed Kuwait International Bank (KIB) in 2007 as both a full-service and Shari’ah-compliant operation) and by government-owned Boubyan Bank.
Other domestic conventional banks grumbled that they were being excluded from a share in the rapidly expanding market for Islamic financial services. They’re forbidden to even open Islamic “windows” and subsidiaries alongside their main operations, as many local and international banks do elsewhere in the Gulf.
