Governor Al-hashel Says Kuwait's Banking Sector Continues To Grow

In his statement, Dr. Muhammad Al-Hashel, the Governor of Kuwait's Central Bank, said the Kuwaiti banks' financial statements for the year 2021 prove once again the flexibility of the banking sector's solution to crises and its continuous ability to serve the economy efficiently without interruption, which indicates a strong financial safety for the local banks.

The Central Bank routinely performs financial stress tests, which support the capital adequacy, liquidity, asset quality, and profitability. An Arabic daily reports that Kuwait's governor stated that the banking sector's consolidated budget has grown from 85.4 billion dinars to 91 billion dinars, representing a 6.5% increase in consolidated budget.

It is noted that this increase in assets is driven by a positive trend in credit facility balances. The aggregate net amount of these facilities at the end of 2021 is about 56 billion. This represents an increase of 4.1 billion as compared to 2020, reflecting an 8% growth rate.

As far as financial safety indicators, starting with quality of assets, the governor explained that non-performing loans are at their lowest level ever in 2021, down from 2% in 2020.

He explained that banks wrote off bad loans from a portion of provisions, which contributed to this percentage. His statement is also corroborated by the fact that the provision coverage ratio has reached 310% in 2021, which is the highest level for this ratio in history.

In regards to Kuwaiti banks' financial solvency, he said that the capital adequacy ratio reached 19.2%, which is over 10 percent above international standards.

According to the governor, this year's capital adequacy ratio will be the highest since the implementation of Basel (3) instructions began in 2013.

With regard to liquidity standards, Al-Hashel explained that the banks enjoy abundant liquidity thanks to the prudent interest rate and exchange rate policies of the Central Bank of Kuwait, which facilitates local savings as well as the regular and continuous flow of liquidity in the various sectors of the national economy, which in turn led to a liquidity coverage of 183% for the year 2021, and a net stable financing of 111% for the same year, which is above the minimum requirement of 100%.

Moreover, the governor indicated that the banking sector's profitability for the year 2021 is close to pre-pandemic levels, with the banks' net profits totaling 961 million dinars.

He also noted the Central Bank's keenness to conduct hedging stress tests in accordance with a sophisticated framework taking into account many variables at the financial and macroeconomic levels as well as scenarios of varying severity and perspective as part of his review of the financial statements for 2021.

The Kuwaiti banking sector showed high resilience during the stress tests, as it maintained an average capital adequacy at the end of 2024 of 12.6%, exceeding international requirements despite the severity of the scenarios applied.

As a final comment, the governor underscored that, after two years of a Corona pandemic, Kuwait's banking sector is enjoying better conditions and greater flexibility, enabling it to face the challenges from a position of strength, as well as pointing to the continuation of active monitoring and regulatory oversight by the Central Bank of Kuwait to fortify the banking sector units based on this proactive approach to enhance the sector's resilience within a supervision system that strives to consolidate monetary and financial stability.

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