CBK orders local banks to stop storing surplus cash with third parties from Jan 1, 2027
Central Bank wants banks to keep their surplus cash under their own roof, under their own supervision, and with clear responsibility for its security and movement.
- Stronger control over cash: Banks will have full and direct responsibility for their cash, rather than leaving surplus funds with external money-transfer or cash-storage companies. This is intended to improve oversight and ensure cash is stored securely.
- Lower operational, security and legal risks: The Central Bank wants to reduce the risks associated with keeping cash outside bank premises, including security concerns, operational risks and unclear responsibility between banks and third-party companies.
- Better cash management and regulatory oversight: Keeping cash within banks will allow for centralized tracking of cash movements, stronger internal controls and risk management, standardized procedures across branches, and better monitoring of cash from receipt to delivery.
Kuwait’s local banks are preparing to end the practice of storing daily cash surpluses with third-party money transfer and cash-storage companies, with the new mechanism set to take effect at the beginning of 2027.
The Central Bank of Kuwait has set December 31 as the final deadline for banks to complete the regulatory, operational and supervisory requirements needed to keep and manage their cash exclusively at their own premises.
The banks’ daily liquidity surpluses fall into two categories. The first, known as “outflow,” covers excess cash used to replenish ATMs across Kuwait. This amounted to 4.9423 billion dinars from the beginning of this year through the end of July. The second, “inflow,” represents cash returning from bank branches, particularly deposit liquidity.
The banks have submitted their plans to the Central Bank outlining measures to complete the required adjustments and prepare for the new cash-management framework. The banks have confirmed their readiness to meet the requirements by the end of the year, allowing them to enter 2027 with the ability to store available cash in designated vaults at their premises.
Under the regulatory requirements, cash must be kept exclusively at bank premises and remain under the bank’s full and direct responsibility and supervision, in line with approved security, protection and control procedures. Banks will not be permitted to store cash with any other party.
Banks are also required to complete all regulatory, operational and supervisory preparations by December 31 within an integrated central framework and in line with best practices. The framework is intended to improve cash-flow management, strengthen internal controls and risk-management systems, provide qualified specialized personnel and introduce training programs to enhance staff capabilities.
In addition, banks must adopt standardized policies and procedures governing cash-management operations across all branches. They will also be required to establish a central database tracking cash movements and providing the information needed for monitoring, control and tracing funds throughout the cash cycle.
One option being considered for handling unused daily liquidity is the establishment of a bank-owned subsidiary licensed by the relevant authorities. Such an entity would be restricted to transferring the bank’s funds, as specified in its articles of incorporation and bylaws, and would not be allowed to conduct other activities or rely on third parties to perform its work. It would remain under the bank’s full and direct supervision.
Once banks meet the requirements for storing daily excess liquidity at their own premises, local banks will be prohibited from keeping cash with third parties. This would eliminate the need for contracts with cash-storage and transportation companies under the existing arrangement, which allows unused cash to remain in the custody of specialized companies for 24 hours.
The new mechanism will require banks to ensure their surplus cash does not remain outside their vaults, whether during receipt or delivery. From a banking perspective, restricting cash storage to premises and sites fully managed and supervised by banks will place full responsibility for cash assets on the banks, including their security, storage, preservation and insurance.
The new requirements will also require high-level security and control standards at cash-storage locations. Banks must establish integrated systems for round-the-clock monitoring of funds and their movement, alongside operational policies and documentation covering the entire cash cycle from receipt to delivery, with senior-management approval.
Banks must also ensure business continuity by identifying alternative locations and establishing procedures for dealing with natural disasters, technical failures and security incidents, in line with regulatory best practices and international standards for cash and liquidity management.
The Central Bank’s approach is aimed at changing how banks handle daily surplus cash and ensuring that readily available liquidity is held in reliable locations. The move is intended to reduce operational, security and legal risks associated with storing cash with third parties and eliminate overlaps in responsibility.
The regulatory push also follows the discovery of cash belonging to money-transfer companies being held at locations not licensed for liquidity storage, including some sites that were not licensed to conduct the activity.
