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Kuwait cbank approves final format of Basel III standard CBK aims to boost banking sector’s reputation

KUWAIT CITY, June 25, (KUNA): Governor of the Central Bank of Kuwait (CBK) Dr Mohammad Al-Hashel announced that CBK’s Board of Directors approved on Tuesday, the instructions of Basel III Capital Adequacy Standard in its final format for both conventional and Islamic banks. The Board had already adopted on Dec 24, 2013, the regulatory capital structure and the transitional phase for implementation thereof in the light of the positive outcomes of the Quantitative Impact Study (QIS) reflecting the ability of banks to meet Basel III Capital Adequacy Standards — despite the additional requirements with respect to regulatory capital, according to a press release by the CBK. “In July and August 2013 the draft Basel III instructions have been issued to conventional and Islamic banks to implement these instructions in parallel with Basel II instructions and, accordingly, such banks shall provide CBK with Basel II capital adequacy statements on a quarterly basis along with Basel III statements until Dec 31, 2014,” Dr Al-Hashel said.

“Basel III Capital Adequacy Standards incorporate some major amendments to Basel II Capital Adequacy Standards — representing an increase in the overall ratio of regulatory capital, whilst at the same time re-defining regulatory capital, coupled with standards that aim at improving its overall quality,” he said. Among these standards are: setting minimum limits for the items in the form of common equity; setting additional margins in the form of conservation capital buffers and counter-cyclical capital buffers; setting stricter terms for Tier II Capital; and rescinding Tier III (which was allowed under Basel II), in addition to further ratios for those banks identified as domestically systemically important banks (D-SIBs), he noted.

Reforms
“As the CBK is firmly committed to implementing Basel III reforms and guidelines, the CBK, since the issuance of such set of reforms, has initiated actions necessary to apply these guidelines, whereby the State of Kuwait will be in the forefront of countries applying best international banking control standards.
“Kuwait’s initiative to be one of the first countries to implement Basel II was welcomed and appreciated by global institutions, and served as a boost to the reputation of the CBK’s supervisory authority and the Kuwaiti banking sector on a global level, including global credit rating agencies as reflected in an upgrade in the credit rating of the Kuwaiti banks,” Dr. Al-Hashel continued. The Governor added that the CBK is moving forward toward accomplishing the other standards of Basel III set of reforms — leverage ratios and liquidity ratio standards according to a well-planned schedule and taking into consideration the QIS outcomes.

“The final Basel III capital adequacy standard instructions are now published on the CBK website (www.cbk.gov.kw) for those interested in the banking and financial business,” Al-Hashel revealed. The CBK is constantly upgrading its regulatory tools in line with best practices so as to reinforce banks’ resilience to financial shocks, whilst capitalizing on well-balanced and gradually introduced regulatory policies that aim to strengthen the banking and financial system, without negatively affecting economic growth, he added.

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