It’s been a difficult 12 months for one of the Gulf’s richest states. Late in 2008, Kuwait’s Gulf Bank announced a US$1bn loss linked to foreign exchange bets and in January the government took a minority stake to rescue the bank. Then in February 2009 the Kuwaiti government announced a US$5.4bn plan to prop up the banks, a move that followed accusations that it had been too slow to shore up confidence. Part of the reason for Kuwait’s tardiness was said to be the authorities’ difficulties in understanding the banks’ books.

Equally worryingly, last December one of Kuwait’s biggest financial players, Global Investment House (Global), defaulted on more than US$1bn of debt. Global, which had been an active private equity player, is in the process of rescheduling its debt. Finance firm Investment Dar, which owns half of UK car company Aston Martin, also defaulted on debt this year and has said it may sell some assets as well as borrow up to US$1bn to refinance loans.

But it is not just defaults that have cast a shadow over the country’s financial sector but also claims of wrong doing. Kuwaiti investment house KAMCO and Bahrain investment bank United Gulf Bank have been forced to defend their behaviour in a controversy that surrounds a Kuwaiti financier who committed suicide in July 2009...

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