Kuwait examines shift from cash to bank guarantees for brokerage firms and custodians
Capital Markets Authority moves to strengthen financial guarantees as foreign investments surge to 545.9 million dinars
The Capital Markets Authority (CMA), in coordination with the Kuwait Clearing Company, is reviewing proposals to update the regulations governing financial guarantees provided by brokerage firms and banks licensed as custodians in the Kuwait Stock Exchange.
The initiative aims to strengthen market safeguards, ensure rapid responsiveness to potential exposures or failures, and enhance the efficiency of settlement mechanisms.
A key component under consideration is the replacement of cash guarantees with non-cash alternatives, such as letters of guarantee or approved bank guarantees, which would be deposited with the main settlement bank in coordination with the clearing house, reports Al-Rai daily.
These measures are designed to allow flexible and rapid utilization of guarantees while maintaining robust risk coverage.
Current statistics reveal that the Guarantee Fund, used to mitigate exposures in coordination with the clearing house, holds approximately 48 million dinars, including 25 million dinars in capital.
Under the proposed framework, the competent authority would have the power to manage guarantees on behalf of brokerage firms or custodians, including liquidating letters of guarantee to cover any entity-specific exposures.
Contributors to the guarantees—including brokerage firms, custodians, and related parties—would be entitled to returns on cash deposits provided for guarantees, unlike the current model.
The proposal also calls for increasing guarantee sizes in certain cases, creating a resilient environment capable of addressing breaches or financial failures that require immediate action.
The Guarantee Fund’s current capital is distributed among 15 entities: Al-Muqasah, 10 brokerage firms, and 4 custodians, namely National Bank of Kuwait, HSBC, Citibank, and First Abu Dhabi Bank.
The local market already benefits from multiple layers of protection, including the broker margin guarantee, variable margins, and reserves set aside for clearing. This layered approach constitutes an advanced model by regional and global standards, with authorities seeking to enhance it through more flexible and efficient development plans.
The CMA emphasizes that strengthening guarantee regulations safeguards market integrity and reputation, while providing appropriate tools to manage potential risks.
Meanwhile, foreign investment inflows into the Kuwait Stock Exchange reached 545.9 million dinars in 2025, marking the strongest net inflows since 2022. Purchases of bank and company shares by foreign investors totaled 2.637 billion dinars, against sales of 2.075 billion dinars, resulting in a net increase of 562.5 million dinars, despite 17 million dinars in net sales by individual investors. Major beneficiaries of foreign liquidity included National Bank of Kuwait (27.2% foreign ownership), Kuwait Finance House (14.2%), and Zain (15.35%).
Historical comparisons highlight that net foreign inflows in 2025 represent a significant recovery from 222.4 million dinars in 2024 and 74.8 million dinars in 2023, while approaching the 792.2 million dinars peak in 2022. Despite occasional selling pressures, local portfolios and funds are strategically positioning themselves to capitalize on opportunities.
Market analysts expect foreign institutions to continue expanding their holdings, particularly in dividend-yielding stocks, while trading activity shows that Kuwaiti accounts recorded net annual sales of 460.7 million dinars, and Gulf investors sold 85.19 million dinars.
