Central Bank issues guidelines
KUWAIT CITY, Sept 12: Banking experts say instructions issued by the Central Bank of Kuwait to appoint independent members in the boards of banks as of June 2020 are largely in line with the events witnessed in the Kuwaiti market, which has become the focus of attention of foreign investors who are looking for professional markets that apply the most professional and supervisory mechanisms in money management, reports Al-Anba daily.
The sources pointed out that the requirements of global governance led the Central Bank to approve the appointment of independent board members in banks are based on international principles so that commercial interests do not overwhelm the members of the boards of banks, stressing that these instructions are applied by a majority of international banks saying the decision aims at establishing the principle of independence, which is one of the foundations of good corporate governance practices.
First, the Kuwait Finance House (KFH) Group Chief Executive Officer Mazen Al Nahed praised the new amendments that have been added to the instructions of the rules and regulations of the Kuwaiti banks, namely the addition of independent members in the formation of boards of directors of banks and their committees. He said, independent board members for banks all over the world – and gave the example of Malaysia – account for 50 percent and this reflects positively on the bank’s performance and independence.
Al-Nahed pointed out that the global requirements of governance imposed good requirements and mechanisms, and reflect positively on the banking sector, which is the mainstay of the economy in any country seeking to keep pace with the global developments and the application of international standards, pointing out that the Central Bank has always been in a race when it comes to the application of best practices in the field of banking and finance, saying it is keen to strengthen its mechanisms.
Al-Nahed said that there is no relation between the previous decision to increase the percentage of foreign ownership in Kuwaiti banks, and the recent instructions to appoint independent members, as both directions have different reasons and motives that will ultimately be in the interest of the Kuwaiti banking sector.
The governance is healthy and feasible for banks, especially Kuwait, which is witnessing day after day developments and positive changes, reflected in the end on the sector and the national economy. Former chairman of the Commercial Bank Abdul Majid Al-Shatti described the instructions as excellent and proactive, as the addition of independent members will create a kind of balance and diversity of ideas, which will reflect on the development of the mechanism of work of banks that constantly seek to catch up with the systems and mechanisms applied globally.
Al-Shatti pointed out that the new instructions are in line with the previous decision to raise the ceiling of foreign ownership in banks, stressing that the Kuwaiti market has become the focus of attention of foreign investors and has become a target for the entry of many capitals of all nationalities. He pointed out that the foreign professional investor is looking forward to the most professional markets that apply the highest regulatory standards available, pointing out that competition among markets has become the most intense in terms of keeping abreast with developments and mechanisms.
Najat Al-Suwaidi, former member of the World Bank’s Board of Directors, said that the instructions issued by the Central Bank are good and compatible with the nature of global markets that require more control and commitment. The appointment of independent members will create a kind of harmony in the boards of directors that have been following the same approach for years.
Al-Suwaidi said the instructions could also be a double-edged sword since the new independent members to be appointed may not agree with existing members, and that could create a degree of division of views,but she felt that the matter is generally subject to the bank’s policy, which will bring different views among members.
However, she praised the decisions and instructions issued by the Central Bank recently, especially with regard to raising the ceiling of foreign ownership in Kuwaiti banks and other regulatory directions, which has become a basic requirement and an effective element capable of attracting foreign investments to the Kuwaiti market