KUWAIT CITY -- Kuwait's parliament approved on Wednesday a bill to guarantee deposits in local and foreign banks based in the oil-rich Gulf state to cushion them against the global financial crisis.

The government bill was adopted by a vote of 50-7, an AFP correspondent reported.

The government pledged to guarantee deposits in banks after Gulf Bank, the country's second-largest lender, said on Sunday it had incurred losses from derivatives deals abroad.

The law, which covers both checking and savings accounts, will allow the government to use public funds to pay for any deficit faced by a bank and does not set either a time limit or a ceiling on the guarantees.

Kuwait becomes the third Arab state in the Gulf to guarantee bank deposits after the United Arab Emirates and Saudi Arabia.