Gulf Bank aftermath.

Post by K.theKuwaiti

Gulf Bank

I decided to stop by and check out some of the Gulf Bank branches yesterday; there was a long queue at every location. Customers almost caused a riot trying to withdraw their money. Gulf Bank were limiting the amount a person could withdraw, but the customers still managed to withdraw over 4 million KWD in cash from the bank!

The aftermath of this issue is going to result in some major overhauls at the Gulf Bank. For an explanation of what happened to Gulf Bank check out the article Gulf Bank of Kuwait Shipwrecked.

Posted by K.

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47 comments, add your own...

  1. Komsomol says:


    Even though CBK moved to secure funds of Gulf Bank, the fact this had to happen would shake people’s confidence with the bank itself.

    Trading in derivatives is risky and really not worth it.

  2. AMQ says:

    the same thing is happening to a bank here in the US but they arent limiting anyone from withdrawing all there money. . .

  3. Lucky_Boy says:

    I think the bank will suffer more from the customers who withdraw their money than what they’ve lost on unpaid contracts.

    I know 3 close family members of mine have withdrawn their deposits off Gulf bank.

  4. sigmaaa says:

    I agree with Komsomol. Trading in derivatives is very risky.. Barings banks suffered.. Societe Generale suffered. Will Gulf Bank suffer??

    But the fact that the bank may have to suffer because of the denial of the client to pay for his losses is really sad.. When they get profits, they take it.. But when they get losses, the bank has to take it!!!

    The Central Bank should force the client to pay for this! Else, the message conveyed is that any client can do whatever he pleases to the banks here, if they passed their money to the bank for trading. How convenient for the clients!! I wish I was a Kuwaiti with a billion KD in my account!!!

  5. croco rock says:

    Very Amateur article.

    The “Credit Reaper” has ZERO relevance to this trading loss.

    Also, if one understands the notion of CBK guaranteeing deposits – then there is no need for him to move money to any other bank, as the ‘security’ or ‘insurance’ is exactly the same.

  6. Thanks mark for your interest :)

  7. Dodo says:

    Gulf bank didnt limit the withdrawal amounts for customers!

  8. ilsul6ana says:

    BURGAN BANK wants to buy the majority of GULF BANK shares

  9. Rasha says:

    I wish everyone would just relax – croco rock says it perfectly!!! CBK is guaranteeing the money – so what’s the point in withdrawing the money? It’s like people just found an excuse to flaff around like headless chickens! JUST RELAX!!!!

  10. Dave says:

    I saw the rush at Most GBK branches yest! U cant blame the people who panicked and got all their money out! For some its a majortity portion of their life savings…!when shit hits the ceiling ..u think anyone would actually give a damn or two about what exactly happ! everyone would be more worried about their own personal case..that obviously wiuld just create more panic but then again it is difficult for an average person to understand the repurcussions of doing the same in such a situation ! anyway im not defending anyone just presenting a layman’s point of view..!! anyway lest all hope for the best!:)

  11. b says:

    Croco Rock: I appreciate the feedback and would like to respond. First of all I think it is you who is the amateur as clearly you do not have an understanding of world markets. Get out of your shell and try to understand things in a global context. So please do not try and comment on things you do not really understand. But ill help you answer your own question.

    Why is the Euro at 1.25? Answer this question and you will understand the Credit Reaper. Plus, I dont think you know or understood what a ‘Derivative’ scythe is. just is case :)

    As for the guarantee situation. I never said that there was no guarantee at GBK. I mentioned only reducing the amount there. That is only due to the service factor. I would much rather bank at place that can service my request rather than wait in line for hours and not be able to complete any transactions. Maybe you enjoy wasting your day trying to withdraw 20 KD to pay for lunch and gas.

  12. Hellraiser says:

    Croco Rock, I fail to see the point of your continuous criticism on each and every comments, this is not a financial blog and readers have the right to express their opinion freely without beeing scrutinised on the quality of their content. If you are a financial Guru why dont you apply as a consultant at GBK and help them remedy their situation. otherwise why dont you stop your bickering and enjoy the posts like everybody else.

  13. Hellraiser says:

    By the way if you are interested in a professional analyis of GBK unfolding story check out

  14. devilish says:

    My opinion
    GBK just booked a ticket to bankruptcy.

  15. croco rock says:


    Thanks for your efforts in trying to analyze the situation, but it’s very obvious you’re a fresh grad with “at best” some form of economic degree.

    Sorry but I’ve been involved in all trading vehicles for over 13 years and have worked for some major International I-banks.

    I’ve seen 3 major bubbles burst and the ensuing unwind.

    How you’re trying to relate a Global Banking liquidity issue with a Trader who happened to be on the wrong end of a short shows your complete naivety on this issue.

    I’ll give you a SIMPLE reason why the EURO is at 125 – because of a flight to safety as people race to buy 30 Year T Bills.

    Thanks for trying though.

  16. Hellraiser says:

    Toni some people are plain dumb! Anyways for further info about the situation
    Very well written article and makes a lot of sense to the lame man.

  17. croco rock says:

    Hellraiser, frankly speaking, because it’s frustrating so see so much bullshit lies being spread through the internet and through sms.

    These lies are causing panic and unnecessary anxiety for hundreds of thousands of people.

    Take a look at some of these posts JUST on here!

    They are mostly utterly unfounded.

    One guy calling CBK’s guarantee as useful as toilet paper, and one budding economist who is relating a rogue trade with the world liquidity crisis…

    Get real guys. Stop spreading rumours and lies over a nothing issue.

    It’s this wide spread panic that will cause an economic crisis in Kuwait as people all over start wondering if they should remove all their money from ALL the banks.

  18. Hellraiser says:

    Croco Rock are you an employee of the GBK? Otherwise I fail to grasp your emotional attitude behind the situation. Its just a Bank in distress like many others in the world, it just happens its in Kuwait. Whats your take on article? and i quote ” Gulf Bank takes the hit and records the loss on its own books. This will have major implications for the bank as the loss represents approximately 54% of the bank’s equity. In addition, GBK is suffering a KD 45 mm loss from treasury shares and if the stock continues to tank this will erode their ability to maintain an acceptable capital ratio. GBK has also classified a major portion of their investment holdings as Available for Sale. As these investments incur losses due to the faltering word financial markets, the bank will also find it difficult to maintain the capital required. This will mean that the bank will have to be recapitalized either by issuing additional capital via the public market [capital increase] or seek additional capital from the Central Bank or Kuwaiti government. GBK will then have to seek the losses from the counter party legally and battle it out in the courts for many years to come. If it fails to recapitalize then the bank will have to consider filing for bankruptcy. “

  19. gargoyle says:

    Croco Rock “people all over start wondering if they should remove all their money from ALL the banks”

    they should, its really unstable and you should remove your money just to be safe, who gives a fu*k about the banks as long as i have my money.

  20. devilish says:

    its a crisis anyway, i just hope one banks failure could not pull down other banks, or its gona be a total chaos in kuwait, we all know that CBK wont let that happen, but it might happen it seems now we got 50:50 % and with day by day withdrawals from GBK, its bye bye GBK :)

  21. croco rock says:

    Hellraiser, no I am in no way affiliated with GBK past or present and am not a shareholder or holder of any funds that are invested in GBK.

    Look, Hellraiser, if you want me to comment on the above I will happily do it but it will take me a long while to rationally disect all the components of the above post. I will write it later.

    What wont happen:

    GBK files for Bankruptcy

    What will happen:

    A CBK bail out package for GBK that will likely last until confidence is restored and the issue of the lost millions is resolved.

    Tighter Curbs on “speculative” Trading Accounts. I expect most Trading Desks in ALL KUWAITI BANKS will now dramatically TIGHTEN.

    A court case against the Accused.

  22. croco rock says:

    Gargoyle, this is exactly the kind of sentiment that will collapse the ENTIRE Kuwaiti Banking System.

    Relax, take a deep breath and enjoy the nice weather outside.


  23. croco rock says:

    Don’t understand your point Toni….”Economics is inferior” ??

    You’re mixing ‘logic’ with ‘psychology.’

    Greed vs Fear.

    Bulls vs Bears.

    Anyways, I’m tired of this. If you want to remove all your money from all banks and stick it under your mattress, just do it.

    Just pray your house doesn’t catch on fire – cause let’s see what your “paper” cash will be worth then.

  24. darkwolf80s says:

    Ya know, I really love how this kind of insider information gets leaked out and how it quickly hits the public, spreading rumors and making majority of the consumers getting worried about their savings. Seriously, if any person was to be working at any major corporation, they should know better that leaking inside information out is one of the biggest mistakes that leads to a bad imagery on a business firm. Doesn’t Gulf Bank have a good PR management system? Why can’t these guys at east send out a press release about how their handling their crisis situation? And when they do send out the press releases (god willing) they need to do some serious investigation on this info got out to the public. Yes we are a small country but you gotta admit, words spread out like wild fire over here.

  25. Desert Girl says:

    NBK is having their own problems. Consumer loans at variable interest rates are going to land them in a world of trouble.

    My friend, for example, borrowed 20,000 KD. They agreed (contractually) to installments over X amount of months. The bank sent them a notification that the interest on the loan was 14,000 KD. However, the Central Bank made this interest illegal, so NBK has raised their installments to an additional X amount of months (don’t know the specific numbers), to cover the interest rates. Again – making it illegal.

  26. cajie says:

    14,000 KD interest on a 20,000 KD loan? That does not seem right.

  27. croco rock says:

    Toni……SELL SELL SELL…..Take your money out of your bank!

    The world is collapsing….. my hairdresser just told me.



  28. Zahed says:

    LOOOOOL croco rock plz dont take this against you but everyone needs to relax no matter what happens i think everything will be ok soon enough so we all have to just chill and wait for it to come.

  29. Ash says:

    Well that was entertaining …at least to read :)…Guys thank you so much for the “insight” gave me a whole new perspective to the words “mass hysteria” and “derivatives”

    Update if anyone hasn’t noticed : Gulf Bank is fully operational , secondly GBK has not “frozen” anyone’s deposits – you’re allowed to take your moolah out and put it anywhere you please and definitely used to what was it —-ermm “to go on vacation in Eid- – rent- – car installments”‘

    Last night a limit was put on the amount , probably ‘coz of the rush and shortage of physical cash. Imagine a surge of thousands heading into withdraw – they weren’t prepared for that and yes the idiots didn’t see it coming. So they had to put a cap on the amount people wanted to withdraw thereby not denying a service completely to everyone standing there yesterday.Today that’s not the case…so please RUSH IN and withdraw it all ASAP before John Mccain gets a heart-attack and Sarah Palin leads to world doom.

    Thirdly – they are open today and will be going ahead with the Al Danah Millionaire 4 days from now

    Finally so much for all the “economic forecasts” from the experts , you had your two minutes of fame and web hits !

    I would suggest any of ya’ll to at least visit a branch or at least talk to someone there and blog about it- – rather than click pics ( Yaah ! Look guys MAYHEM ! :P) and predict economic downfall based on graphs and case studies. But then again it’s a forum as hellraiser pointed out – Dive straight in !

  30. b says:

    @croco rock: its sad to see ppl fight for respect and credibility. I would like to actually have a debate with you if you are interested. I stand firm by my analysis and actually dont hold an econ degree and it seems from your ignorance on the subject, the fact that you only think in a vacuum, is what is preventing you from seeing the bigger picture here. But since you did mention the euro i will respond.

    Simply outlined so that you may comprehend the connection:
    Credit crisis starts with US banks (mainly subprime) –> spills over to prime borrowers and takes toll on leveraged individuals and institutions (mainly driven by real estate decline) –> financial institutions are hit as their investments are written down. –> central banks assist in recapitalization of banks and some financial institutions –> global de-leveraging is taking its toll and markets sell off as correlations between all asset classes (fx included) go to 1 –> investors get hit further on their exposure as forced selling is taking place
    In addition, if you did study economics you would know that all indicators point to dollar depreciation. So one could argue that buy shorting the dollar (as in the case of the GBK) was a fundamental trade however the risk was not managed well.

    As for your comment

    ‘I’ll give you a SIMPLE reason why the EURO is at 125 – because of a flight to safety as people race to buy 30 Year T Bills.

    Thanks for trying though.’

    It doesnt seem that SIMPLE actually.
    1. Flight to safety is a factor but the points outlined above should address this issue

    2. There is no such things as a 30 Year T-BILL (funny how 13 years of experience pays off :)
    T-bills: maturity of 1 year or les
    T-Notes: 2, 5, 10 year
    T-Bond: 10 – 30 year

    3. ppl are not rushing to buy 30-year BONDS. They are in fact buying up the shorter end of the yield curve, ie T-bills, 2yr and some 5yr. If you compare the current yields of the 2yr (1.43%) and 5yr (2.51%) you can see this very clearly. In addition when comparing the respective yields to the TIPS with similar maturities you can see that ppl are actually PAYING to be in US$, which is putting further pressure on the US$ to appreciate.

    4. The ECB and FED have opened up the swap lines for the banks so essentially everybody is borrowing in US$

    5. I can go on and on and on.. all night long, with many many more examples of what is going on.

    Thank YOU for trying ;)

  31. Dave says:

    This could be a good study discussion session for students ! to read everyone’s take on this matter..i would actually love to be a university student now! with all thats happening atleats professors would focus more on the actual scenario with reference to teaching rather than stick to books and theoritical jargon!:)

  32. croco rock says:

    B: Frankly speaking, I don’t have the time or energy to waste on this topic anymore. It’s clear there is a lot of ‘textbook’ ignorance in your world as highlighted by your pedantic dissection of T Bonds vs T Bills – which has little relevance to the topic at hand anyways!!???

    I’ll ask you one last simple question, which I don’t expect you to bother answering, because you still haven’t addressed it the first time I asked.


    WHAT RELEVANCE is this “Credit Reaper” to GBK?

    Case closed. Try harder.


  33. Frankom says:

    Kuwait injects $2.7 billion into leading bank to prevent failure


    A familiar story but yet another region. A global solution is going to be needed though I remain skeptical that it will happen. The recent rapid growth in Kuwait and Dubai was tied to yet another bubble and we know what bubbles do when they grow up. They burst.
    Kuwait’s Central Bank stepped in Sunday to prop up one of the country’s biggest banks and said it was considering guaranteeing deposits in domestic banks — in one of the first concrete signs that the global financial crisis may next hit the oil-rich Gulf.

    In Saudi Arabia, meanwhile, the government said it would deposit $2.7 billion into the Saudi Credit Bank to help lower-income citizens deal with financial difficulties, the country’s Al-Ektisadiya newspaper reported.

    The two moves came just a day after finance ministers from the six-nation Gulf Cooperation Council held an emergency meeting to echo assurances, which they have repeatedly voiced over the past few weeks, that the region’s banks face no liquidity crisis.

    Kuwait’s decision to stop trading in shares of Gulf Bank sent a shock wave through the country’s bourse, which closed down almost 3.5 percent and brought its year-to-date losses to over 19 percent.

  34. b says:

    @croco rock: you are right, i do have to try harder. It seems that explaining these concepts to ignorant people is much harder. im glad everyone else gets it, but dont worry ill stick in there for you. in my book i dont leave anyone behind.

    T-bill vs T-bond: i wanted to clear the confusion you caused by giving you the definition as obviously you dont know the difference. Second, the point YOU made was INCORRECT ‘ppl rushing to buy 30 yr’ they are in fact buying shorter dated treasuries such as t-bills, 2 yr and 5 year. So it is relevant in that it discredits your statements as they are not a true explanation of what is happening in the market. I think you are pissed bcz you were called out for being wrong.

    Credit Reaper relevance: As explained in my last post but i will try and simplify matters for you.
    1. Credit Reaper (ie Credit Crisis) takes its toll on financial institutions bcz of US housing market
    2. Financial institutions are in trouble. Need to re-capitalize and de-leverage.
    3. Individuals and companies alike are de-leveraging as well and ppl seek the US$ as a safe haven (EU opens up swap lines etc)
    4. Ppl rush to buy US$ hence appreciating the currency. This is not supposed to happen from a fundamental basis. So, if you are a fundamental investor you want to would Short the US$.
    5. GBK situation. Investor based on fundamentals shorts the US$ but is hit bcz everyone is trying to buy US$. So he gets hit due to the global credit crisis.

    So, Short US$:
    – GOOD fundamental trade
    – POOR risk management from the bank and client side

    I know it might be hard for you to comprehend but I am sure that if you try you will get it. I am available all day and will hold office hours as well, just for you.

    Plus kudos on the ‘big’ words. What dictionary are you using? :)

    Also, what firm are you working for? just in case i havent pulled my money yet

  35. jo says:

    NBK rocks its a safe bank in the current climate. they are liquid and have implementations in place.
    Gulf Bank had always spent over its means and made very uneducated deals.

    All banks will feel the ripple effect just some more than others.

  36. Pediatric Dent says:

    I have a feeling that the safest place for my money is below my pillowcase

  37. cajie says:

    It’s nice to see all the expert opinions here – but since these are the exact same experts who put us in this mess in the first place, I have to agree with #46.
    Safe place for your money is under the pillowcase :)

  38. daggero says:

    I guess it serves them right for laying out food Buffets in certain floor during day time in Ramadan in complete disregard for the Holy month .
    I hope it was worth it Big Shots

  39. Just Jay says:

    (yawning, and spreading arms) As the self appointed representative of the “evil” West, please allow me to interject my “two cents” into the melee. I have never claimed to be a financial expert, although I have many friends who work in the industry. IMHO, I think the entire meltdown on the US side was caused by greed. Sub Prime mortgages, banks bought them, and resold them, and resold them again. People were 5, 6, 7 years in on a 30 year loan, and refinanced at a lower rate… So, you have a few extra thousand dollars in your pocket. Your home equity is gone… and to top it off, you are at square one… from 23 years; to a 30 year mortgage again… if you blow your money, you are in dire straits. The companies that invested heavily in these kinds of firms made their money back YEARS ago. There was time to bail, but nooooooo…. Greed kept them in the game, until the game was over. As loans went into default, banks had to cover. The US housing boom started to implode, and take its share of casualties. Regardless of your personal feelings towards the US, the Dollar is a major player in the financial world. Oil, is traded on the USD. A weak dollar is usually mirrored by higher oil prices, and the same in reverse. The difference now is the World’s markets are following suit this time. When you stop trading a stock in the US, it is a death blow. Maybe Gulf Bank is different. Then again, maybe it isn’t. Luckily, I use ABK… along with my US Bank, of course. Kuwait has had a lot of time to invest in things other than oil, and I was under the impression that they did. (Along with a lot of other oil-rich countries.) Let’s hope that they did.

  40. croco rock says:


    Quote from your ‘piece’

    “The derivative product was long US$ and long volatility (That means if the US$ appreciates vs the Euro the investor losses money)”


    Oh dear oh dear oh dear…..Talk about erroneous information. You’ve been called out big time.

    Explain that to us why don’t you….


  41. b says:

    @croco rock: typo and fixed. But good to know you are still trying to come out with something since every other argument you have made has been proven wrong by me.

    Desperation is a B**** ;)

  42. croco rock says:


    So you make 2 critically false statements that completely negate your original premise – and you still expect to be taken seriously?

    1. Long dollar, Long volatility

    2. Correlating a rogue derivative trade with a World liquidity crisis, when in reality this loss could have happened at any single time in our history, even when the KSE was at 15k.

    You do know that currency trading has been very active for decades right? You’ve heard of Soros right? No? Didn’t think so.

    Nice try, but I think the only person to be proven wrong by ‘you’ is yourself.

  43. b says:

    @croco rock: Again its nice that you are trying so hard, something must have hit with you, and hit you HARD. I am past that first statement you made, blog is reflecting actual trade, i think its time you move on.

    2. I think this is truly amateur in nature and again you are thinking within the box. Obviously again you have not traded in FX in your 13 year lifetime as a hairdresser/i-banker. 5 big fig moves in single days in the Euro are not common. There is a reason all this is happening simultaneously and its due to the reasons highlighted in my piece.

    As for the hungarian reference, he was actually not the guy to put on the cable trade, his trader came to him with it, all he did was apply a lot of leverage.

    Im starting to really think you are delusional. But in any case this is all good for my blog, thanks to you I am getting a lot of email with support and ppl are seeing how ignorant you are.

    Thanks and keep it up please you are only making a fool of yourself. :)

  44. croco rock says:


    Did I strike a nerve? You seem awfully defensive. Relax, take it easy and next time (assuming there is a next time) prior to posting your erroneous nonsense, try doing a little more research.

    I’ll leave you with one simple question:

    Could this rogue trading loss have occurred when the World was going through an economic boom?

    Case closed.

    Quit whilst you’re behind.

  45. says:

    Has anyone seen the “emergency press meeting” with the new chairman Qutaiba Alghanim? He was sitting there with his cigar answering reporters questions.. with questions. Very professional.

  46. b says:

    @croco rock: HAHAHHA .. trust me you could never strike a nerve with me and Im having an amazing day, emails keep piling in and feedback has been great. I am actually starting to enjoy this a lot, never thought it would be this much fun to keep proving ppl like u wrong. Its saddens me to still see you holding on.

    As for your simple question, nothing has brought me more pleasure than answering this. It actually makes my argument even stronger and I will actually incorporate it in the report I am putting together that highlights this situation in detail, so thank for bringing this up.

    First of all looking at daily range data, in order to proxy volatility moves for the respective currencies (EUR/USD and GBP/USD or the Euro and Cable).

    Euro: we observe that the average daily range for this pair is .57 big figs and about 1.2 big figs for a 1 sigma range.

    Oct 14, 2008: The first time in the HISTORY of the Euro that it ever traded in a daily range in excess of 5 big figs (actual was 5.1). This is considered a 8 SIGMA event.

    Cable: we observe that the average daily range for this pair is .8 big figs and about 1.8 big figs for a 1 sigma range, so slightly more volatile than the Euro but this is also observed by many FX traders as well.

    Oct 14, 2008: The cable actually trades within a 11 SIGMA range of 10.5 big figs. The next closest range is 2 sigmas away at 9 SIGMA, and yes you guessed it, it was Sept 16 1992 when your Hungarian friend was having a field day.

    [Source: Bloomberg, Factset]

    So NO we have never seen moves this big in the FX markets and this is a historic event. It was the subprime defaults fueled by the american housing bubble that led to a spill over in the banking and financial system that put these wheels into motion thus taking out various derivative structures that would have paid off otherwise. Even Litterman’s quant (GS) or Simon’s acclaimed quant model that drives his HF, Renaissance, do not account for these kind of sigma events. Do ppl love money every day, yes. After all these markets are zero sum. but do ppl lose this much money, probabilistically and historically no. Kuwait might possibly make it on the world ranking for derivative losses, first place at the moment goes to Citic Pacific with a $2 bn fx hedge that went wrong.

    Even if you look at equity returns, as noted by Value Square Asset Mgt and Yale University for the S&P yearly return data for the S&P index the only other year that compares to 2008 is 1931 where the losses range from -50 to -40 %.

    Anyway, I think i have exhausted this point many times and if you dont get it by now then i think you should change careers, maybe go into bus driving or something. I actually think that your i-banking career was either spent fetching coffee, or u were a sales/marketing guy. I am not going to waste my time on this subject but I am glad at least I came out ahead and with more data to support my argument.

    If for any reason you would like an additional beating please email me and we could discuss the topic further, or any topic for that matter. you can find my contact info @

    its been fun ;) LOOOOOOOOL

  47. b says:

    @toni: dont worry i eat ppl like him for bfast. i think he’s just lonely

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