KUWAIT CITY, Jan 21: Some banks are considering submitting a proposal to the Public Institution for Social Security (PIFSS) requiring retirees to provide a clearance certificate if they decide to transfer their accounts from one bank to another. Sources disclosed this will ensure the retirees follow the procedures applied to all other clients, reflecting the principle of equality without procedural discrimination.

Sources indicated that this proposal is part of banking efforts to safeguard banks’ credit rights and to avoid legal action against retirees in the event of outstanding financial obligations. This is not the first time such a proposal was discussed between the banks and the institution. Banks previously presented this idea to the institution, but it was rejected at the time. The institution justified its position by stating that it is legally unable to oblige retirees to provide a clearance certificate if they choose to transfer their benefits from one bank to another. It explained that this stance is intended to prevent legal action that banks might take against retirees in case of outstanding financial obligations, adding that “this practice contradicts the Social Security Law and the relevant decisions.”

Therefore, the institution’s application of this procedure is no longer viewed as a matter of banking discretion. Sources pointed that activating the requirement for a clearance certificate for retirees is important within the banking sector, particularly amid increasing discussions about PIFSS refunding contributions to individuals registered in its system whose Kuwaiti citizenship was revoked prior to retirement, resulting in their ineligibility to receive a pension. Sources clarified that under these circumstances, banking concerns are growing over the possibility that some retired borrowers may transfer their accounts to another bank before receiving their pension, thereby, depriving the lending bank of the ability to deduct loan installments until the borrower proves compliance with the repayment schedule. Sources stated that banks extend credit to retired clients based on their retirement benefits, whether in the form of a lump-sum bonus or a monthly pension.

Sources pointed out that if retirees are allowed to transfer their accounts from one bank to another without obtaining a clearance certificate, the lending bank risks losing control over the primary collateral securing the loan. Sources explained that the seizure of a client’s funds, whether the client is retired or not, requires specific procedures to be followed by banks, foremost among them is that the funds should be deposited in the client’s account. They stated that once funds are transferred to another bank, the creditor bank can no longer deduct installments in the event of default.

Sources added that banks recently adopted a unified approach to streamline the issuance of clearance certificates, allowing same-day issuance in certain cases—particularly for clients who have not obtained credit cards – and within a maximum of 10 days, compared to the previous period of up to 45 days. Sources stressed that banks are keen on avoiding unjustified delays in issuing clearance certificates to clients wishing to change banks, while protecting their credit rights from the risk of default.