Kuwait – Central: The banking sector enjoys strong financial conditions

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(MENAFN – Al-Anbaa)

  • Al-Hasel: We are keen to support the productive sectors that contribute to the employment of national workers
  • The central always has the highest degree of readiness to intervene through various monetary and supervisory policy tools

The Governor of the Central Bank of Kuwait, Dr. Muhammad Al-Hashel, said that Kuwait pursued prudent monetary policies for a decade, and today it reaps the fruits of these policies to face the unprecedented crisis (the spread of the Corona virus emerging as a benefit – 19), which affected the repercussions of all countries of the world.

Al-Hashel added in an interview with Al-Arabiya TV yesterday that this crisis is primarily humanitarian in nature, as the epidemic is still killing lives, in addition to the severe damage it has caused to economies, as it is an unusual shock on both sides of supply and demand, which forces confronting its economic repercussions using various tools Economic policies.

He explained that at the regional level, the difficulty of this crisis lies in “we are fighting on two fronts, on the one hand we have an outbreak of the virus that imposes on the world a bitter choice between saving human lives and saving their lives, and on the other side we have a sharp drop in oil prices, which reached 65% since the end of 2019.”
Regarding Standard & Poor’s downgrading of Kuwait’s sovereign rating to (AA-), he stated that this is to be expected in such circumstances, but despite reducing Kuwait’s sovereign credit rating by one degree, this rating is still relatively high.
Strong financial conditions
Asked about the Kuwaiti banks’ preparations for the shock of the “new corona,” Al-Hashel said that since the beginning of the global financial crisis in 2008, the Central Bank of Kuwait has initiated a precautionary policy methodology in order to fortify the banking sector by directing banks to strengthen their capital bases and build prudential allocations, in addition to hedging financial fenders, especially As stated in the Basel (3) standards package that we implemented in full in 2014 and 2015, to make Kuwait the forefront of the countries that implement these standards.

He continued: Thanks to these prudent prudential policies for the central bank, the banking sector today enjoys strong financial conditions reflected in the financial safety indicators of Kuwaiti banks in terms of capital adequacy standard, financial leverage standard and liquidity standards, which are at rates that exceed international standards, which we benefit from today in facing the current crisis.
Concessional monetary policies
On the most prominent aspects of monetary and control policies adopted by the Central Bank of Kuwait to support the economy and the banking sector, he clarified that on the level of monetary policy operations and in light of the current economic conditions and conditions required by the application of facilitative monetary policies, the Central Bank reduced the discount rate to 1.5%, which is the lowest level Historically.
He mentioned that in addition to that, the repo rate and the prices of all the intervention tools of the Central Bank in the money market have been reduced, which is a series of integrated measures aimed at reducing the cost of borrowing for all sectors of the national economy and enhancing the flow of cash flows between these sectors and the banking sector in a manner that maintains Stability of interest rates structure and maintaining the attractiveness of the dinar.

On the level of loans for the purchase or development of private and exemplary housing, he pointed out that the amendment included an increase in the volume of funding granted to the value of the property or the cost of development, stressing that the application of these tools will put in front of banks a wide and sufficient lending space to meet the requirements of lending and financing at this stage in addition to that “The central is always with the highest degree of readiness to intervene through the various instruments of monetary and supervisory policy.
Sectional damage
Regarding the damage of some economic sectors but not others in this crisis, especially small and medium enterprises, he stated that the monetary and control policies applied by the (Central) involve direct and indirect support to the SME sector as one of the sectors of the national economy by reducing the cost of lending to those institutions, adding that “it must Looking at the affected sectors to prevent the transformation of its problem from a liquidity problem into a solvency problem and ensuring that productive sectors with added value that contribute to employing national labor and diversifying economic activity are supported.

Al-Hashel mentioned that the Cabinet has formed a committee that was mandated to chair it to implement a package of measures in support of the national economy that includes special measures to assist the small and medium enterprises sector by postponing the installments financed by the National Fund for Small and Medium Enterprises Development. The measures also included other measures represented in providing loans and easy and long-term terms For small and medium enterprises.

And the governor indicated that in the framework of implementing these reforms, the “Central Bank is based on implementing these measures through coordination with banks in this regard and we are going to announce this soon.”
There is no fear for the dinar
Dr. Muhammad Al-Hashel said that the average capital adequacy ratios in Kuwaiti banks exceed 18% and that “there is no fear for the Kuwaiti dinar.”

The governor added that banks can continue to distribute the 2019 dividend despite the crisis the country is experiencing due to measures to tackle the Corona epidemic.

Al-Hashel had issued instructions that include reducing the regulatory requirements for banks in light of the Corona virus crisis, including the reduction of capital adequacy requirements and liquidity standards.

He explained that the situation is subject to close monitoring by the Central Bank of Kuwait on a daily basis, and it is possible to intervene when necessary.

Al-Hashel indicated that it is too early to ask Kuwaiti banks not to pay dividends this year, and no such decision is needed yet.
Infusion of liquidity when necessary
Al-Hashel stressed that the banking sector enjoys an abundance of liquidity that exceeds the requirements of regulatory ratios. Likewise, public spending continuously feeds the levels of liquidity in the banking sector regardless of the decline in the state’s general revenues in light of the low oil prices.
He added that despite this, the Central Bank of Kuwait reduced the liquidity requirements in the banking sector in order to give the banks additional space in which to move comfortably, noting that (the Central) is the bank of banks and within the framework of its functions as a lender of last resort is able to pump liquidity into the banking sector when necessary and has The tools and ingredients that enable him to perform this role very efficiently if necessary, therefore we have no concern in this regard.

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