DUBAI- Kuwait's Capital Markets Authority cancelled all of Wednesday's stock market transactions after bank stocks fell in the wake of a banking federation statement that Kuwaiti banks would not pay dividends for 2020, the authority said on Thursday.
Kuwait's index fell 1.51% on Wednesday after the Kuwait Banking Association said that, after meetings with the central bank, Kuwaiti banks would not pay out dividends for this year to preserve liquidity amid the coronavirus pandemic.
The banking federation made the announcement in a statement carried by state news agency KUNA.
But the Capital Markets Authority said that the federation did not have the authority to make such a decision and that its statement included "inaccurate" information.
A CMA statement said the negative implications on bank stocks caused by the banking association's statement required "the authority to intervene to restore fairness, transparency and efficiency to the stock exchange."
As a result, the CMA decided to erase Wednesday's trades as though they had not happened, opening Thursday's session at where the market ended on Tuesday.
Setting out the central bank's position, governor Mohammad al-Hashel was quoted by Al Rai newspaper on Thursday as saying: "Global accounting standards require that if the supervisory authorities reduce the capital requirements for liquidity ratios, for banks to use as a strategic initiative in the face of the crisis, that dividends will be stopped in return."
Hashel added that banks are free to distribute dividends if they did not benefit from the eased capital adequacy requirements, but would be in violation of international banking standards if they distributed dividends while benefiting from the eased requirements.
(Reporting by Ahmed Hagagy; Writing by Yousef Saba, Editing by William Maclean) ((Yousef.Saba@thomsonreuters.com; +971562166204))
