KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
4. Governance 4.1 Corporate Governance Requirements Corporate Governance and Systems and Controls Requirements for Banks in Kuwait The purpose of regulating corporate governance in the banking sector aims to enhance transpar - ency, accountability, and financial stability. The CBK is the primary regulatory authority responsi - ble for setting and enforcing governance stand - ards for banks, with additional supplementary oversight provided by the CMA. This section outlines the statutory and regulatory require - ments for corporate governance applicable to CBK-Regulated Entities. Effect of the CBK – CMA MOU As mentioned in 3.1 Requirements for Acquiring or Increasing Control Over a Bank , the MOU between the CBK and CMA establishes a co- operative framework to manage overlapping responsibilities in governance, particularly in are - as of transparency and market conduct. While the CBK leads in regulating internal corporate governance, the CMA focuses on market-relat - ed governance, including disclosure obligations and shareholder protections. The MOU aims to co-ordinate overlapping regulatory actions from multiple entities with statutory oversight without duplicating regulatory effort. Primary Corporate Governance Regulations The CBK’s Corporate Governance Guidelines (2019) set requirements for the composition and duties of the board of directors, the estab - lishment of committees such as the audit, risk, and governance committees, and the imple - mentation of internal control systems to manage operational, financial, and compliance risks. The guidelines also cover oversight of risk manage - ment practices and compliance with governance standards.
The CMA’s By-laws include express regulations for certain CBK-Regulated Entities engaging in securities’ activities. For example, Module 5, titled Securities’ Activities and Registered Per - sons, sets out what, according to the CMA, con - stitutes a regulated activity (requiring a license from the CMA), and which persons need to be registered within an entity that engages in securities activities. While this section applies directly to CBK-Regulated Entities which engage in CMA-regulated securities activities, the CMA is permitted (under Article 1-1) of the Module to “exempt CBK-Regulated Entities from some or all of the provisions set out in this [Module 5]”. Similarly, Module 10 focuses on transparency and disclosures and is applicable to CBK-Reg - ulated Entities as market participants (eg, listed entities) requiring them to adhere, among others, to public disclosure rules. It is worth noting that, despite Module 15 of the CMA By-laws outlining the governance framework for listed companies (which are mostly applicable on a comply-or- explain basis), it expressly excludes CBK-Reg - ulated Entities from its scope. This means that the CBK-issued 2019 Corporate Governance Guidelines govern CBK-Regulated Entities. Governance Structure and Roles in CBK- Regulated Entities • Board composition: The board must have a minimum of 11 members, with at least four of these members being independent. Addition - ally, the board is required to establish several key committees to support sound govern - ance, risk management, and regulatory com - pliance. These committees include the audit committee, risk and compliance committee, corporate governance committee, nomina - tion committee, remuneration committee, and for Islamic banks, a Sharia board to oversee compliance with Sharia principles. Further - more, the CBK enforces “fit and proper”
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