The Competition Protection Authority (CPA) has received requests from 3 alliances to establish digital banks in Kuwait, including 7 listed companies, noting that the authority’s officials have begun studying the competitive weights that can arise from these alliances in the future.

The sources told a local Arabic daily out that the three licensing applications submitted to the device include Boubyan Bank’s alliance with Zain Telecom Group and other what it called “undeclared” investors, the alliance of “Ooredoo”, Warba Bank, the Kuwait Investment Company and Al-Manar Finance and Leasing Company, in addition to the alliance of Kuwait and Middle East Financial Investment Company. KMEFIC is with “undeclared” investors, noting that there are a set of requests to establish digital banks submitted by unlisted entities.

Contrary to expectations, “Agility” did not submit a request to the “Central” within the specified deadline, which ended at the end of last June, which means that the company retracted its efforts to establish a digital bank, according to its disclosure on the stock exchange website on August 22, 2021.

The sources suggested that the Central Bank’s approvals regarding licensing digital banks would not exceed the granting of licenses to two independent banks only, bearing in mind that the Central Bank will announce applications that meet the conditions and criteria at the end of 2022.

According to the nature of advanced alliances, KMEFIC and others are the only ones that do not operate in accordance with Islamic law, which increases the chances of licensing them, based on previous official statements indicating the possibility of granting a traditional and Islamic license.

In a related context, the sources confirmed that any of the applications submitted to establish a digital bank, specifically those submitted in the form of alliances, will not be able to start its business unless it obtains the approval of “Protection of Competition,” even if it has a license from the “Central.” It is useful that the approval of the device in this It is necessary to ensure that there is no harmful competitive concentration on the market.

The sources indicated that according to Article (12) of the Competition Protection Law, persons participating in economic concentration operations must submit an application to the Authority before completing them, if the value of their registered assets or annual sales in the country exceeds, according to the audited financial statements of the last fiscal year before concentration. Total and individual limits in accordance with the conditions and controls set by the Council in accordance with Article (10).

The sources noted that the application submitted to “Competition Protection” to study mergers and acquisitions requests must be accompanied by a payment receipt for a fee estimated at 1 in a thousand (0.1 percent) of the paid-up capital, or of the value of the combined assets, whichever is lower and with a maximum of 100,000 dinars.

The sources added that licensing emerging digital banks with the participation of allied entities from “Competition Protection” is a supervisory procedure and a condition that cannot be bypassed, but this approval does not mean approval of the license, as the final decision in this regard remains in the hands of the “Central” as the supervisory regulator of the sector in accordance with the law.

From the organizational point of view, this means that if the alliance obtained the approval of “Protection of Competition” for licensing a digital bank, and in return its request from the “Central Bank” was rejected, the word “Central” would be supreme, on the basis that the role of the agency here is only to ensure that there is no economic concentration resulting from the emerging alliance From the partnership leads to a permanent economic or commercial imbalance in the future.

The sources indicated that the Authority’s law clearly defined the regulatory requirements for mergers and acquisitions movements, as it stressed the need to obtain the approval of “Competition Protection” to study the impact of advanced alliances, explaining that this regulatory obligation applies to all cases of alliances, even those formed in emerging sectors, such as digital banks.

It seems clear the interest of several large groups and entities in obtaining licenses for digital banks, which is a fundamental turning point in the banking financial tasks and even a development that is expected to impose itself on the scene during the coming period, especially since the experience that the region faced in light of the Corona pandemic imposed strategic needs for citizens and residents.

The sources pointed out that since entering the digital transformation race, various entities, including banks, are competing to win the largest piece of the “cake” for users of modern technologies, and this will include large investments that will be pumped into digital services and products, explaining that this includes alliances seeking to establish digital banks, which requires Ensure that there are no cases of harmful economic concentration as a result of the developed blocs

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