Thought the Middle East’s oil fortune would help its billionaires withstand the economic downturn? Nope. Kuwaiti banker Bassam Alghanim became the first Gulf financier to fall victim to the credit crisis after suffering $800 million in losses on bad derivative trades. Stick with oil.
Forbes: Flush oil prices and plenty of mystique had, until recently, lent the Persian Gulf an aura of immunity when it came to the current credit crisis. No more. Kuwaiti banking billionaire Bassam Alghanim became the first visible Gulf casualty Tuesday, when he resigned as chairman of Gulf Bank, Kuwait’s second-largest lender.
At issue: an estimated $800 million in losses the bank incurred as a result of defaulted derivative trades, the first case of public hemorrhaging in the region. Gulf Bank’s board of directors made the unprecedented decision after an emergency meeting Tuesday, one day after Kuwait’s central bank promised to guarantee all deposits at local banks in a Hail Mary pass to restore confidence among consumers unused to financial uncertainty. Gulf Bank, which temporarily suspended trading of its shares, said it would consider a capital increase or even a merger to shore up its business.
Alghanim, who was worth $2.8 billion as of March 2008, presided over record growth at Gulf Bank in 2007–when shares were up over 100%–industry accolades and an Aa3 rating from Moody’s, which is now reportedly considering a downgrade in light of evidence of risk mismanagement.
Photo from Forbes
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