Liquidity Regulation in Kuwaiti Banks: A Comparative Analysis

Introduction

The Liquidity Coverage Ratio (LCR) is a critical metric for assessing the liquidity risk of banks. In this article, we will discuss the LCRs of Kuwaiti banks and explore why some banks have high levels of liquidity while others do not.

Key Findings from the Table

The table provides an overview of the LCRs of various Kuwaiti banks. Here are the key findings:

Average Reported LCR

• The average reported LCR among Kuwaiti banks is 159.8%.

Bank-Specific LCRs

• Gulf Bank: Has the lowest reported LCR at 124%.
• Boubyan: Has the highest reported LCR at 334%.

Commercial Bank of Kuwait (CBK) - A Special Case

CBK has a headline LCR of 155%, but its actual liquidity is higher due to excess cash inflows.

Reasons for Excess Liquidity

• CBK’s excess liquidity is not due to high holdings of High-Quality Liquid Assets (HQLAs).
• Instead, it is attributed to the bank’s relatively high level of expected cash inflows.

Conclusion

In conclusion, the LCRs of Kuwaiti banks vary significantly, with some banks having high levels of liquidity while others do not. While CBK has a headline LCR that may seem low, its actual liquidity is higher due to excess cash inflows. Understanding these differences can provide valuable insights for regulators and investors alike.

References

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