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CBK okays local banks’ request over credit concentration ratio exemption

Towards KPC and its subsidiaries by over KD 500 mln

KUWAIT CITY, Sept 15: Some local banks have obtained approvals from the Central Bank of Kuwait (CBK) on requests for exemption from credit concentration ratios towards Kuwait Petroleum Corporation and its subsidiaries by more than KD 500 million, reports Al-Rai daily quoting reliable.

According to the regulatory instructions, the CBK allows banks to not exceed 15% of the bank’s capital base, which includes its capital, retained earnings, and its supporting capital.

The sources pointed out that the new instructions require the exclusion of some banks, from the upper limit allowed to focus on the government oil sector and lending its institutions, noting that this amendment will increase the ability of local banks to meet the credit requests planned by KPC to finance its capital programs in the next five years (starting from 2018), with a total borrowing of 16 billion dinars from financial institutions. This comes at a time when the proposed KPC 2040 strategy projects have a capital value of up to half a trillion dollars.

The sources said that the decision to amend the credit concentration of banking on the oil sector, came after extensive meetings between the CBK and KPC and local banks, which expressed their willingness to finance mega projects, which are planned by the government oil sector, stressing that the financial situation of the Kuwaiti banking sector is sound and liquidity is abundant.

The sources pointed out that the amendment on the percentage of concentration of some banks towards KPC came in coordination with CBK and the Department of Public Debt in the Ministry of Finance, to develop a plan for domestic and foreign issuances, to be compatible with the proposed financing structure of these projects, and also compatible with the requirements of local economic and monetary conditions to ensure that no confl icting yield curves are found.

The sources pointed out that KPC indicated that its proposed future financing needs are upright with the strategic directions aimed at reaching Kuwait’s crude oil production to 4.75 million barrels per day by 2040, up from about 3 million as the current production capacity, pointing out that KPC plans to develop and explore more than 2,000 oil wells to reach the target production ratio.

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