The Central Bank raises the maximum available funding grants
Amendments to the Basel III capital adequacy guidelines
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The Central Bank of Kuwait raised the maximum available for granting the financing scheduled according to its instructions on March 15, 2016 from 90 to 100 percent, and entered into a circular to banks, “Al-Rai” obtained a copy of it, amendments to its instructions regarding the capital adequacy criterion “Basel 3”, By releasing the hedge capital hedge of 2.5 percent of the risk weighted assets in the form of shareholders’ equity, it reduces the capital base requirements in its comprehensive sense.
The Central Bank reduced the minimum requirements for capital in its comprehensive concept (CET1 + AT1 + T2) from 13 to 10.5 percent, the minimum basic capital (CET1 + AT1) from 11 to 8.5 percent, and the minimum shareholder equity (CET1) From 9.5 to 7 percent.
This came in addition to reducing the risk weight of the portfolio of small and medium enterprises from 75 to 25 percent, while standardizing their definition, in accordance with the definition contained in Law No. 98 of 2013 regarding the establishment of the National Fund for Small and Medium Enterprises Development, as amended by Law No. 14 of 2018 and its regulations Executive and its amendments.
The bank also amended the guiding rules issued on January 1, 2005 regarding the exclusion of any customer from the ceilings set for credit and financing concentration, and the rules that are taken into consideration when studying exception requests to include important economic projects, and whose support entails achieving added value to the local economy.
The “Central” also amended the instructions of the prohibited financing controls for individual clients, to purchase or develop real estate located in the areas of private housing and model housing issued on December 13, 2013, by increasing the volume of granted funding to the value of the property or the cost of development, to include raising the financing for the purchase of space from 50 To 60 percent, financing for an existing property from 60 to 70 percent, and building financing only from 70 to 80 percent.
In terms of liquidity standards, the “Central” circular included a reduction in the minimum due according to its instructions issued on December 23, 2014 regarding the liquidity coverage standard from 100 to 80 per cent, and a reduction in the minimum established in the standard of net stable financing from 100 to 80 percent.
This comes in addition to reducing the minimum limit on the ratio of regulatory liquidity from 18 to 15 percent, and raising the maximum negative cumulative gap according to the “Central” instructions issued to conventional banks on October 14, 1997, and Islamic banks on November 3, 2003 and amended on June 6, 2004, It becomes 7 days and less for the maximum negative cumulative gap of 10 to 20 percent, one month or less from 20 to 30 percent, 3 months or less from 30 to 40 percent, and 6 months or less from 40 to 50 percent
The Central Bank amended its supervisory instructions and macro hedging policy tools today, to help banks in these circumstances play their vital role in the economy and motivate them to provide more loans and financing to the productive economic sectors and clients affected by the crisis, who need liquidity that enables them to continue their activities without Stop under these conditions, to avoid the customer’s difficulties from turning into a liquidity shortage into long-term problems affecting their solvency.
This came in a statement to the Governor of the Central Bank of Kuwait, Dr. Muhammad Al-Hashel, in which he pointed to the strong conditions enjoyed by the Kuwaiti banking sector reflected in the financial safety indicators of Kuwaiti banks that exceed the global rates, thanks to the prudent policies adopted by the Central Bank of Kuwait since the global financial crisis in 2008 in anticipation To face such conditions that go through us today, which led to building a strong and solid balance of capital rules, contingency provisions and hedging fenders, and what qualifies the banking sector today to continue to play an effective role to support the national economy in the current circumstances.
He explained that the instructions issued by the Central Bank of Kuwait to banks included reducing the liquidity standards applied to banks such as the liquidity coverage standard, the standard of net stable financing, the ratio of regulatory liquidity, in addition to raising the maximum limits for the cumulative gaps in the liquidity system, and raising the maximum available for granting financing.
Al Hashil said that in order to provide more support to the small and medium enterprises sector, the credit risk weights of these projects portfolio have been reduced from 75 percent to 25 percent for the purpose of calculating the capital adequacy ratio, with the aim of motivating the banking sector to provide more financing for this vital sector And inspiration. In addition, the instructions of the Central Bank of Kuwait allowed banks to release the hedge capital block within the capital base, thereby reducing capital requirements. Likewise, in terms of loans for the purchase or development of private and exemplary housing, the amendment included an increase in the permissible percentage of granted financing to the value of the property or the cost of development.
He stressed that the package of measures applied by the Central Bank of Kuwait aims to support vital economic sectors, projects with added value for the local economy, and those affected by individuals, small and medium enterprises and companies, and help them to overcome the current circumstances.
The Governor concluded his statement by noting that the Central Bank of Kuwait will continue to follow closely the banking sector to ensure that this incentive package is used in a manner that achieves its intended purpose, and that banks play an effective role in these pressing circumstances to provide liquidity to the productive economic sectors, and will not fail to take further measures to meet The supreme interest of the national economy.