KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
owned or specialised banks (eg, the Industrial Bank of Kuwait); • have a minimum initial share capital of KWD75,000,000 (and KWD15,000,000 if a conventional bank is establishing, as a sub - sidiary, a Sharia-compliant bank); and • submit a feasibility study for the establish- ment of the bank; for Islamic banks in par - ticular, the founders thereof are required to subscribe in a minimum of 10% of its share capital and are restricted to a maximum 20% at the time of founding. Branches of foreign banks Foreign banks applying to establish a branch in Kuwait must capitalise such branch in the minimum amount of KWD15,000,000. Moreover, such applications must accompany a feasibility study justifying setting up the branch in Kuwait. Licensing Process The CBK Regulations do not outline specific steps to be followed for the licensing process of a bank. Article 56(3) of the CBK Law high - lights the legislature’s approach in that respect, requiring first an initial application to be submit - ted to the CBK for a preliminary approval before commencing the incorporation process. The convention in Kuwait, given the lack of specifi - cally outlined steps, is to engage with the CBK through an expression of interest and a series of meetings to agree on the incorporation of a bank. The CBK takes incorporation processes that meet the minimum thresholds set out above on a case-by-case basis before giving its initial approval, following which the standard incorpo - ration rules of the Companies Law would apply for the incorporation. Kuwait, as at the date of this writing, has 11 banks. Each of these banks (which were estab - lished under the then applicable companies’
law) has been established by an Emiri decree under which the establishment of the bank is approved in principle (such Emiri decree was a requirement under the then applicable rules). The CBK then takes over the role of oversee - ing the licensing process and the fulfilment of the general rules under the CBK Regulations. It is to be noted, however, that under the exist - ing rules the CBK Law does not necessitate the issuance of an Emiri decree as a prerequisite for the establishment of a Kuwaiti bank. For an indicative timeline of the licensing pro - cess, in the example of Warba Bank (the most recently founded Kuwaiti bank), the relevant Emiri decree was issued on 15 September 2009, and Warba Bank was admitted to the register of banks at the CBK on 7 April 2010. Banking Activities Licensed by the CBK The CBK Law provides that banking activities are those dealings which are “customarily car - ried out by banks” including: • the receipt of deposits; • lending or financing; • trading in and issuing debt instruments; • trading in currencies and metals; • the provision of credit and securities; and • any other activities identified as such by the Commercial Code or custom. All CBK-Regulated Entities are permitted under their respective licenses to carry out some or all of the above banking activities except for credit information companies and electronic payment service providers. Moreover, the CBK Law recognises the frame - work within which Islamic banks operate, where - by financing activities must adhere to the rules of Islamic Sharia with respect to the prohibition
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