Banks move to take full control of cash as new CBK rules reshape liquidity management
Local banks are studying a proposal to establish a special company to manage cash liquidity, following a regulatory directive issued by the Central Bank of Kuwait prohibiting the safekeeping or storage of bank cash with third parties.
Sources familiar with the matter told Al-Rai that the move aims to ensure bank funds are preserved, transferred, and managed solely under the direct responsibility of banks and within the supervisory framework of the Central Bank, in accordance with approved protection, control, and security standards.
The directive comes as part of efforts to strengthen the resilience of the banking sector and reduce operational, security, and legal risks linked to outsourcing cash custody and transportation services.
Banks have recently been instructed to establish independent liquidity management centers, prompting discussions over several implementation models.
Among the options under review is the creation of a jointly owned company that would act as a unified cash management hub for banks, similar to their shared ownership structures in KNET and CINET.
Other proposals include forming smaller partnerships between two or more banks or acquiring an existing licensed company specialized in cash custody, storage, and transportation in line with new regulatory standards.
Sources indicated that bank ownership of such an entity represents the most practical solution to address governance concerns raised by regulators, particularly since existing cash custody companies currently operate outside direct Central Bank supervision.
The proposed structure would ensure full accountability for cash assets while aligning operations with international best practices in liquidity and risk management.
Despite its strategic importance, the initiative presents operational and technical challenges, including limited banking expertise in cash logistics and the need to comply with strict regulatory controls covering custody, storage, transportation, and documentation processes. No final agreement has yet been reached regarding the preferred implementation model.
The Central Bank has emphasized the need for banks to enhance operational efficiency in managing cash liquidity, adopt documented policies approved by senior management, and maintain full traceability of cash movement from receipt to delivery.
Requirements also include dual auditing mechanisms, strong internal controls, accurate record-keeping, and comprehensive business continuity plans supported by regular testing.
In addition, banks are required to maintain emergency and crisis-management frameworks addressing natural disasters, technical failures, and security incidents, alongside 24-hour monitoring systems, controlled access procedures, fire protection measures, and strict separation of duties to reduce operational and internal risks.
