Ratings agency Fitch on Thursday revised its outlook on 11 Kuwaiti banks to negative from stable, after downgrading the outlook on the sovereign itself this month.
The agency said as “a significant proportion of the banking sector funding is related to the government,” the banks would come under pressure if the sovereign itself is “experiencing some form of stress.”
The ratings agency on Feb 2. downgraded its outlook on Kuwait’s sovereign debt rating to negative from stable, warning of near-term liquidity risks associated with the state treasury fund.
The 11 banks are National Bank of Kuwait, Kuwait Finance House, Burgan Bank, Al Ahli Bank of Kuwait, Boubyan Bank, Gulf Bank, Commercial Bank of Kuwait, Ahli United Bank (Kuwait), Kuwait International Bank, Warba Bank, and Industrial Bank of Kuwait.
Fitch however said Kuwaiti authorities would support the banks if needed and mentioned that the central bank has acted swiftly in the past.
An OPEC member state, Kuwait has been hit hard by lower oil prices and the COVID-19 pandemic.
Repeated rows and deadlocks between cabinets and successive elected assemblies have led to several government reshuffles and dissolutions of parliament, hampering much needed economic reforms.