Kuwait’s Central Bank Issues New Regulations for Digital Banks
Introduction to Digital Banking in Kuwait
The Central Bank of Kuwait (CBK) has introduced new guidelines for establishing digital banks, a move aimed at supporting banking innovation and financial stability in the country. The regulations were issued in February 2022 and reflect Kuwait’s efforts to keep pace with global developments in financial services.
Background on Regulatory Approaches to Digital Banks
Following a study on regulatory approaches to digital banks, the CBK identified 40 business plans that met international standards under 25 central bank frameworks. This initiative is part of a broader trend in the region, with similar moves being made by the UAE and Saudi Arabia to digitalize their banking sectors.
Key Regulations for Digital Banks
The new regulations cover four key areas:
- Defining Digital Banks: The regulations clarify what constitutes a digital bank, including its corporate structure.
- Permitted Activities: The guidelines outline the activities that digital banks are permitted to engage in.
- Stages for Establishing Digital Banks: The regulations set out the stages for establishing digital banks, including application submission and evaluation periods.
Evaluation Criteria for Applications
The CBK will assess applications based on quantitative and qualitative criteria derived from relevant laws. The evaluation period is set to conclude at the end of 2022.
Expected Outcomes
Two digital bank licences are expected to be granted in December this year, in addition to seven listed companies already operating in Kuwait.
Long-Term Implications for Kuwait’s Economy
The guidelines include two stipulations with long-term implications for the country’s economy and financial sector:
- Capacity Building: Digital banks must contribute to capacity building, ensuring that professionals in the industry develop new skills to meet growing demands.
- Cybersecurity Framework: The CBK has introduced a cybersecurity framework to address risks associated with digital payments and reliance on third-party technologies.
By addressing these critical areas, Kuwait’s banking sector is well-positioned for growth and innovation in the face of rapidly evolving financial technologies.