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Central Bank of Kuwait Issues Guidelines for Digital Banks

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The Central Bank of Kuwait (CBK) has released guidelines outlining requirements for establishing digital banks, according to a statement issued by the bank on Wednesday.

Emphasis on Smooth Banking Sector Operation

Ensuring the smooth operation of the banking sector is one of the bank’s top priorities. With the rapid transformation of the banking industry driven by digital technology, new business models are emerging that provide better and more accessible services to customers.

Development of Digital Banking Framework

The CBK has developed a digital banking framework to support and enable the establishment of digital banks. This was achieved after benchmarking regulatory approaches from 25 central banks and studying use cases from 40 digital bank business models.

Three Main Models for Digital Banks

According to Dr. Al-Hashel, there are three main models for digital banks:

  • Operating as a unit within a traditional bank
  • Partnering with a digital institution where the bank handles core banking operations while the second party handles customer relationships and other areas of operation
  • Establishing a standalone digital bank

Guidelines for Establishing Digital Banks

The CBK has issued comprehensive guidelines for establishing new digital banks. The guidelines are divided into five parts:

Definition of Digital Banks

  • Coverage of licensed activities and supervisory instructions and controls
  • Description of the legal framework governing digital banks in Kuwait
  • Overview of licensed activities and requirements for obtaining licenses

Phases and Procedures for Establishment

  • Step-by-step guide to establishing a new digital bank
  • Requirements for submitting applications and documents

Supervisory and Regulatory Instructions and Controls

  • Overview of supervisory and regulatory instructions and controls applicable to digital banks
  • Requirements for reporting and record-keeping

Application Process Opened

Completed application forms and documents must be submitted to the CBK by June 30th, 2022. During this period, the CBK will respond to all queries received. The applications will be evaluated against specific objective criteria over a six-month period, with initial approval expected by year-end.

Added Value through Innovative Business Models

Digital banks will create added value through innovative business models that serve the economy and public good while prioritizing the integrity and stability of the banking and financial system in Kuwait.