Reducing Bank Loans To 95 Percent Of Their Deposits

The Board of Directors of the Central Bank of Kuwait (CBK) has decided to gradually start withdrawing the package of regulatory mitigators related to liquidity and the capital adequacy standard, and to return them to what they were before the Corona crisis, provided that the maximum allowed funding is adjusted in relation to the size of deposits to become 95 per cent instead of 100 percent, as is currently in effect, as of January 1, 2022, and adjust again to 90 percent in early 2023.

The Al-Rai quoting sources said the CBK circulated to the banks its decision in this regard, including gradual easing of the regulatory mitigation package on two occasions, the first at the beginning of next year and the second on January 1, 2023, including amending the regulatory limits for the regulatory liquidity ratios, the liquidity coverage standard and the stable net financing standard.

At the beginning of April, the Central Bank launched a stimulus package, which includes reducing the requirements for liquidity standards by approximately 77 percent, and it was scheduled to end in December of the same year, but it was extended for an additional 6 months, to end at the end of last June and it was decided to work on it until the end of next December.

According to the decision, the Central Bank allowed the banks, as a matter of facilitation, to continue releasing the precautionary capital buffer within the capital base, which reduced the requirements for liquidity ratios, and allowed the banks to benefit from an additional lending space from their funds and precautionary reserves of nearly 5 billion dinars, to direct them to the eligible economic sectors.

The sources said that withdrawing the package and returning to the supervisory instructions that preceded “Corona” is a positive indicator that confirms the fading of the banking need for these mitigants in the coming period, which were aimed at alleviating pressure on banks, in supporting vital economic sectors, value-added projects for the local economy, and helping affected individuals, small and medium enterprises and companies.

 

SOURCE : TIMESKUWAIT

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