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CBK makes Kuwait Banking sector efficiently resilient
September 30, 2017, 3:15 pm

Central Bank of Kuwait (CBK) does not implement a ‘higher the better’ regulations on Kuwait’s banks in order to make them more resilient, rather we want them to be “efficiently resilient” said the Governor of the CBK, Dr. Mohammed Al Hashel.

"We aim to be prudent but in a balanced way, carefully weighing the costs of each measure against its benefits," said the governor, adding that stability of the Kuwait banking sector has not only helped them adjust and weather a challenging macro environment, but has also enhanced their capacity to play an important role in credit intermediation, with the ultimate aim of supporting the country’s economic growth.

Delivering the keynote address at the recently concluded Euromoney Conference held in Kuwait, Dr. Hashel detailed a host of new measures taken by CBK, in line with the best global practices, to support the banking sector.

With the aim of designing and building a regulatory regime that helps avoid any financial turmoil and limits the very potential of even the buildup of crises, the CBK along with the banking community has worked diligently to build buffers and is being prudent despite pressures to ease up, said Dr. Hashel.

He pointed out that the CBK had enhanced its Capital Adequacy Regime (CAR) and as a result the CAR of the banking industry stood at 18.6 percent, well above the Basel benchmark. Additional capital requirements up to 2 percent have been put up so that banks maintain additional cushion and limit the buildup of systemic risk.

He added that the asset quality of Kuwait banks had improved with non-performing loan ratio steadily declining to reach 2.2. percent, a historically low level and thus growth in Kuwaiti banks net income has remained profitable unlike their counterparts in advanced economies.

On new financial technologies (fintech) impacting the banking sector, Dr. Al Hashel said that a constantly changing business environment required a dynamically adapting banking system that was also vigilant to upcoming risks. He pointed out that the financial sector was not immune to the growing footprint of latest technologies in everyday lives, especially in fintech and needed to be at the center stage of such progress.

He noted that Central Banks the world over had to determine how far to go in embracing fintechs without compromising safety and stability of their systems. "Our approach to regulate innovations is both enabling and proportionate, as we aim to use a tiered process of introducing rules in accordance with the risks involved.”

Dr. Al Hashel concluded his remarks by noting that the government had taken some difficult yet necessary steps to enhance macroeconomic resilience and strengthen fiscal sustainability. He pointed out that progress was still needed on structural fronts such as rationalizing expenditures, increasing non-oil revenues, reforming labor market, increasing private sector role and in general diversifying the economy.

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