KUWAIT Law and Practice Contributed by: Yousef Al Shereedah, Abdulrahman Al-Roumi and Bashayer Al-Tuwais, International Counsel Bureau – Lawyers and Legal Consultants
Funding structure of DGS The CBK plays a central role in managing the deposit guarantee scheme, overseeing its day- to-day administration. However, it is important to note that the actual funding for any payouts comes from MOF, which draws from Kuwait’s General Reserve Fund (GRF). This arrangement places the full financial responsibility for the DGS on MOF, ensuring the government covers any deposit shortfalls. Nevertheless, reliance on the GRF raises concerns about the scheme’s sus - tainability when the GRF is depleted. In practice, if a bank were to fail, the CBK would gather detailed data on eligible depositors, while MOF manages the payout process. The Deposit Guarantee Law mandates that the gov - ernment report all disbursements made under the scheme to the National Assembly and the State Audit Bureau, promoting transparency and ensuring public oversight. Categories of depositors and deposits covered The DGS applies to deposits held in the follow - ing types of financial institutions:
countries that impose caps on deposit protec - tion, Kuwait guarantees full coverage for all deposits. For comparison, the Federal Deposit Insurance Corporation in the United States (FDIC) provides protection up to USD250,000 per depositor, per bank, while in the Europe - an Union, the DGS ensures protection up to EUR100,000 per depositor. The unlimited guarantee remains in place, offer - ing full protection with no cap on the amount covered. To date, Kuwait has not faced any payout events under this scheme. Notably, there have been discussions about introducing a capped deposit insurance system; however, no legislative changes have been implemented. 7. Prudential Regime 7.1 Capital, Liquidity and Related Risk Control Requirements Capital, Liquidity, and Risk Controls Kuwait’s implementation of Basel III Since the aftermath of the Souk Al-Manakh Stock Market Crash (which was a highly specu - lative, unregulated, and unofficial stock market) in 1982, Kuwait has maintained a conservative monetary and macroprudential policy. To align with global standards, the CBK has fully imple - mented Basel III regulations concerning capital adequacy, leverage, and liquidity. The first time the CBK rolled out its version of Basel-compliant capital adequacy standards was in 2004 when it incorporated Basel II into its regulatory frame - work. Starting with a gradual phase-in, the CBK introduced a full implementation plan of the Basel III capital adequacy standards in 2014, under which the CBK:
• conventional banks; • Islamic banks; and • specialised banks.
The guarantee extends across all types of depos - its, from retail and wholesale accounts to for - eign and domestic currency deposits. Whether a depositor is an individual with a modest savings account or a corporation with substantial bal - ances, they are fully covered under the scheme. Unlimited coverage under Kuwait’s DGS A standout feature of Kuwait’s DGS is its unlim - ited coverage, setting it apart from most bank - ing protection systems worldwide. Unlike many
• increased the regulatory capital ratio; • set minimum common equity limits;
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