The Central Bank of Kuwait is preparing a bill that will raise the government guarantee on deposits that was approved in 2008, within the law to enhance financial stability, explaining that among the objectives of the expected law is to replace Full guarantee of deposited amounts with another that covers a specific ceiling for each customer.
The deposit balances in local banks approach 44.2 billion dinars.
The sources indicated to Al-Rai newspaper that the Central Bank of Kuwait's approach in this regard is linked to a package of global and local considerations, including Kuwait's sovereign rating, explaining that it was noticed recently that rating agencies Al-Alamiya puts among its considerations that the government guarantee of deposits constitutes an obligation on the state, which puts pressure on the sovereign rating, even if this obligation is indirect.
She also mentioned that these agencies take into consideration that the state will pay deposits to customers in the event that its banks default on this, indicating that this view puts pressure on the rating, even if this was the case. The agencies believe that this is impossible, given the financial strength and creditworthiness of Kuwaiti banks.
She noted that the Central Bank is currently calculating with high accuracy the cost of raising the guarantee in exchange for maintaining it, and taking the most appropriate decision that will represent protection buffers for the market and for banks in the event that the raising cost is less than Warranty retained and voided.
The sources said that the Kuwaiti Central Bank is working, as part of its study, to develop a guarantee system as an effective alternative to the state guarantee, and that there is more than one conception of this, including the establishment of a body or fund that guarantees cooperation With banks, a part of customers' deposits, noting that one of the proposed scenarios is that the state remains a guarantor of a certain minimum amount of funds, regardless of the value of the deposit.
And she indicated that the customers' choice of the banks in which they will deposit their money in the future will depend, in the event of raising the state's guarantee, on two main considerations, either based on the name and position of the bank, or the value of the interest that they receive. They will obtain it, which will allow to raise the level of competition among local banks.
