CBK surveys treasury officials to assess liquidity management

The Central Bank of Kuwait has taken steps to anticipate the future of the banking industry by directing a questionnaire to treasury management officials. The purpose of the questionnaire is to determine the policies and liquidity management practices of banks, assess their compliance with regulatory guidelines, and gather insights on interest rate trends. Sources revealed that the move is part of broader efforts by the Central Bank to navigate the complexities faced by the global and local economies, as well as social and technological changes, reported Al-Rai Daily.

The questionnaire comprises technical questions that enable the assessment of banking liquidity efficiency for individual banks. In recent months, local banks engaged in fierce competition to attract liquidity, even offering higher interest rates than those prevailing in the market. However, this competition has calmed down due to optimistic expectations about a potential interest rate reduction by the US Federal Reserve in the first quarter of 2024.

The questionnaire sent to treasury managers seeks information on the banks’ policies for arranging liquidity entitlements, managing associated risks, and providing funds for different time periods, including daily, weekly, monthly, and yearly needs. The survey also aims to determine the sources of funds commonly used by banks, assess if liquidity is available at desirable rates, and identify any potential shortages.

The questionnaire also explores whether each bank has sufficient liquidity or not. This information helps regulatory authorities gauge the treasury departments’ appetite for attracting deposits in light of expected interest rate reductions. The data collected by the Central Bank assists in building a more disciplined understanding of liquidity, deposit trends, and interest rates based on internal banking numbers.

This initiative targeting treasury departments follows a similar move by the Central Bank to gather insights from corporate management. The bank had requested sector officials to provide their expectations regarding trends in the Kuwaiti economy, particularly related to small company lending activity over the next three months. By engaging with different bank departments and conducting extensive analysis, the Central Bank aims to develop a comprehensive understanding of the banking sector. This approach enhances the regulator’s ability to make informed decisions aligned with the requirements of the evolving market conditions.

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