Press Releases
CBK Governor's Statement on the Issuance of Islamic Banking Law
The National Assembly has recently passed Law No. 30/2003 (concerning Islamic Banks) that modifies Law No. 32/1968 (concerning Currency, Central Bank of Kuwait, and Organization of the Banking Business) by inserting to the latter?s Third Chapter a special section on Islamic banks.
On the occasion of passing of the new law, H.E. Sheikh Salem Abdulaziz Al-Sabah, the Governor of CBK, stated that the issuance of this law satisfies an urgent need for legislation to regulate the Islamic banking business in the State of Kuwait, and which fulfills a suitable measure of the aspired objectives in this regard. H.E. the Governor added that the Law ensures regulation of both existing and future Islamic banking business on sound bases that take into account not only the special characteristics of Islamic banks but also the appropriate supervisory principles and standards. It also regulates the supervision of Islamic banks entrusted to CBK, which shall carry out this supervision in the context of achieving its objectives and discharging its responsibilities in the area of both managing monetary and credit policies and supervision over units of the local banking system.
H.E. the Governor outlined the main features of the Law, and the conditions set to establish new Islamic banks, Islamic banking units affiliated to Kuwaiti (traditional) banks, or Islamic banking branches of foreign banks. He said that the Law allowed Kuwaiti (traditional) banks to practice Islamic banking activities through affiliates in which the principal bank owns at least 51% of the capital, and that each bank is allowed to establish one affiliate that has only one headquarters with a capital of not less than KD 15 million.
The Law allows existing local banks to convert into Islamic banks in accordance with terms and conditions set forth by CBK Board of Directors. It allows Islamic banks to engage in direct investment according to conditions set by CBK Board of Directors. It also allows CBK to introduce Islamic instruments to deal with Islamic banks in order to regulate banking liquidity.
H.E. the Governor pointed out that the Law stipulates that it shall take effect six months after publication in the official gazette. Therefore, licenses for establishing new Islamic banks will not be issued before that time. He added that CBK is about to complete a Guide of supervisory controls and instructions for Islamic banks, which will be issued soon.
(For more information: English)
