The Kuwaiti banking system may be banged up, but it remains stable and generally well monitored, and supervision is likely to improve. It has previously been through troublesome times, such as the 1982 Souk al-Manakh crisis and the 1990 Iraqi invasion. Kuwait’s financial regulatory system has tended to evolve most radically when faced with a crisis – although the latest one hardly compares in magnitude to the former two. The public and parliamentary tendency to blame the government as soon as anything goes wrong – particularly when share values are affected – goads the authorities into action.

That bodes well because changes are needed to shore up confidence in the system. The annual report on the Ku-waiti banking industry from international ratings agency Moody’s Investors Service, which was coincidentally released just days after the Gulf Bank scandal broke, shifted its outlook from stable to negative. The report explained: “This reflects, on the one hand, the still good operating environment and the sector’s good financial fundamentals, but on the other hand, Kuwaiti banks’ high exposure to the weakening domestic real estate market, some earnings quality concerns, the banks’ indirect exposure to local equity markets and tightening conditions on international credit markets.” The damage may not be too severe; nonetheless, it needs fixing. Anyone know a good repairman?

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