KUWAIT CITY, Dec 23: Local banks used the committee of their legal advisers to address the Ministry of Justice regarding a recent failure to document any mortgages for clients previously financed by other banks without using their assets for the mortgage, reports Al-Rai daily quoting sources close to the issue.
The sources pointed out that the banks recently commissioned the Committee of Advisors to prepare a legal study that would make it impossible to pledge the assets to a third party, in preparation for submitting the proposal to the Justice Ministry and to act as a legal measure to avoid any legal disputes that may arise between the banks and their clients in this regard.
Sources said, what prompted this trend of banking is that some banks have recently discovered that some of their customers who obtained loans without their assets being mortgaged on the basis of their pledge not to do so with any other bank in future, have received subsequent funding, but backed by pledged assets documented in the Ministry of Justice.
The sources indicated that obtaining funds usually requires the customer to provide guarantees to the financier, whether bank or financial institution. The guarantees may vary for different reasons governed by the investment policies of each bank, taking into consideration that there are guarantees equal to the value of the loan and beyond, to 150 percent.
On the other hand, there is a norm or banking tradition with many customers that loans can be obtained without any mortgages that guarantee the bank’s credit. These cases are limited to customers with a strong financial position and good credit history.
The sources explained that the credit experience with more than one client proved to the banks that some of their clients with strong financial standing had secured assets for new funds, despite their contractual pledge not to do so with another bank.