There are 3 banks that have recently raised the degree of their competitiveness in attracting deposits, to the extent that one of the banks provided a pricing of up to 6.1 percent, while the competing banks in this department managed a pricing that is between 25 to 50 points lower, according to the policy formulated by each bank in covering its liquidity requirements.

Of course, higher interest rates than normal trading rates are not offered to all customers, but they are directed to owners of elite or “VIP” deposits, whose funds range from 500 thousand to one million dinars and above, and the terms of their deposits are characterized by stability, and for not less than a year, which motivates the bank, which competes to attract deposits, to give them special rates, reports Al-Rai daily.

The high interest may include some clients who offer liquidity less than half a million dinars, as this depends on the extent of the bank’s need for liquidity at the time of offering these funds, provided that the period of their deposits is not less than a year.

In contrast to the momentum of banking competition to attract stable and high-value deposits from some banks, the most conservative banks in terms of increasing the cost of their funds are unable to price rates much lower than the highest ceiling in circulation in the market reaching 5.5 percent for the majority.

Conservative banks that have high levels of surplus funds are sometimes forced to raise their pricing on deposits to limits close to the pricing granted by competitive banks, in order to protect their customers from reverse migration.

The sources stated that the wide demand emanating from some banks to attract liquidity was not towards courting government agencies, as is customary, every time the complexities of arranging liquidity arises.

In addition, the question is legitimate about what drives banks to intensify competition among themselves to attract deposits, and to the extent that it accepts narrowing the margin of profitability achieved between this high pricing of deposits and granting loans at 6.5 percent interest and then exposure to the risks of rising cost of funds at impressive rates.

In this regard, sources stated that the main reason that encourages liquidity regulators in any bank to exceed the signals of the profitability criterion in their balance to calculate the cost of deposits and loans is the extent of the need for liquidity, the ability to organize the maturity scale, and the timing.

In short, a bank that has a greater ability to arrange its liquidity conditions is characterized by a low appetite for granting interest that is higher than current, but if it faces pressure in this area, its policy makers are forced to accept the principle of paying a high cost in order to avoid falling into a crisis of lack of success in regulating liquidity.

There are also banks seeking to build advanced positions of deposits for more than one reason, including that deposits represent for them a major source of funds and financing loans, and there is also a banking conviction that interest trends locally are on the verge of a new rise soon, whether by a self-movement from the Central Bank of Kuwait, or in the wake of an additional increase from the US Fed Reserve in interest on the dollar, which gives the early ignited competition for attracting deposits an additional glow.

What is worth noting in this regard is that some banks that accept higher interest payments, their policy in this regard is directed only to amounts that are sufficient to arrange their liquidity conditions, after which the bank exits from the burning competition.

In addition, there are basic banking variables that have emerged with successive and rapid interest rate hikes, which are difficult to ignore by treasury managers in banks, foremost of which is the rise in interest rates granted on the dollar, and the monetary and banking need to increase the attractiveness of the local currency, in return for reducing the demand for the dollar, in addition to the rise in the prices of the “interbank” market, or what is known as the deposit market between banks, so that all of this fuels the movement of high interest on the dinar.

What deserves clarification here is that the acceptance of banks to pay high interest on trades to attract deposits does not mean that they face challenges in their liquidity levels, as it is known that all Kuwaiti banks are glutted with liquidity, but some of them sometimes face complications in arranging the scale of their dues, which pushes them to offer a higher interest rate than current market placement arrangement benefits.

It is reported that according to the monthly statistics of the Central Bank of Kuwait, the total deposits in the banking sector at the end of last November amounted to about 47.091 billion dinars, registering an increase of 455 million (+0.98 percent) compared to the previous month, while it witnessed an increase of about 2.53 billion dinars (+5.68 percent). ) since the beginning of 2022, and its growth reached 2.271 billion (+5.07 percent) compared to November 2021.

The general trend of rising deposit prices in local banks during the recent period confirms the solidity of deposits in the banking sector.

This also indicates the permanent and continuous confidence in the national currency as an attractive and reliable vessel for local savings, due to the stability that the Kuwaiti dinar enjoys against the US dollar and other major currencies, which are all within the engines of attracting and stabilizing deposits in the national economy and not the discount rate alone, but there are many tools used by the central bank in the framework of its control policy.

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