AlQabas reports that the Governor of the Central Bank of Kuwait delivered a short and sharp message to Kuwaiti investment companies at his last meeting with them.
He is reported to have told them that they have only two choices in front of them. Accordingly, they should abandon pleas for increases in liquidity, the lowering of interest rates, or the purchase of company assets.
Instead they have to choose from one of the two courses of action:
- Agree a rescheduling with their lending banks. Some investment companies have done this which proves it is not impossible. It's incumbent on other firms to begin this process.
- Submit themselves to the Financial Stability Law mechanism. He noted that to date there have been no cases so one cannot say what the results will be.
He criticized companies for failing to confront and disclose their current situations. A fact that he related to the size of their problems.
What's clear is that many of these companies are still in denial about the extent of their problems. And that they are in the typical borrower's "delay and pray" mode. If I don't formally recognize the problem, it doesn't exist. Maybe a miracle will happen. Asset values could reach their previous heights. The government will launch a bail-out. Sadly, this has happened enough times in Kuwait to make this a credible strategy. A profound sense of citizen entitlement - even when unjustified - is one of the legacies of a "rentier" state. And of course, local banks who funded these wise investments similarly are looking for a way out of the predicament. So there are two sets of voices calling for a government "rescue".
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