Banks told to increase rate

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KUWAIT CITY, Aug 9: The Central Bank of Kuwait has directed banks, after its recent decision to raise the discount rate by 0.25 percent, to increase their pricing for individual deposits in dinars by a minimum of one eighth of a percentage point, in a regulatory effort to increase the attractiveness of the national currency amid the widening margin between the discount rate. The interest on the dollar is about 1.25 percent, as the US interest currently ranges between 5.25 and 5.5 percent, reports Al-Rai daily. The Central Bank has finally approved raising the discount rate from 4 to 4.25 percent, as of July 27. The sources indicated that, according to the CBK directive, all banks adjusted their price scale for new customer deposits, to add the added percentage, each according to its pricing, noting that the interest rate granted to customers differs from one bank to another, according to each bank’s need for liquidity.

There are also technical considerations that determine the special interest rates, as the high rate is directed to clients with elite or “VIP” deposits, whose funds range from 500 thousand to one million dinars and above, and the terms of their deposits are characterized by stability, and their bonding periods are not less than one year, This motivates the competing bank to attract deposits to give them special rates. Of course, there are reasons related to meeting the liquidity ratios, which the CBK is keen to be at very high rates, as there are banks that suffer from arranging their liquidity ratios most likely in the first half of this year, especially with regard to the “LCR” standard, as well.

Others have surpluses, but they are not consistent with their plans to expand their lending activities, and therefore they are working to raise their share of dinar deposits from the individual market. The sources pointed out that the highest interest rate is usually granted for long-term deposits, which start from a period of one year or more, while the lowest pricing is for short-term deposits such as the day and the week, noting that the CBK monitors the movement of deposits and their prices and any decline from the rates that were directed to be amended.

The sourcecs stated that the banks’ demand for individual deposits, particularly elite clients, is still strong, on the basis that they are classified as stable funds to a large extent, and it is difficult to move them from one bank to another if the owner is offered a slightly higher pricing by a competing bank, unlike commercial deposits that are less stable and more mobile in demand for the benefit of highest rate.

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