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29.12.22Press Release

CBK Issues its 10th Edition of the Financial Stability Report

As part of the constant efforts to increase transparency and public disclosure through providing credible information and data relevant to the local banking and financial sectors, the Central Bank of Kuwait (CBK) issued the Financial Stability Report for the year 2021.

In an official statement, the Governor of the CBK, Basel Ahmad AlHaroon, stated that the year 2021 marks the 10th edition of the report which covers the latest developments of the Kuwaiti financial system. The year saw a gradual decline in the ramifications of the Covid pandemic, with faster vaccination distribution and the lifting of mobility restrictions enabling economies to recover.

The report provides an in-depth analysis on the latest global and local economic developments. This includes an overview of the main markets, a glimpse on the local financial system, the developments in the banking sector, and an evaluation of the most prominent risks banks face including credit, liquidity, market, and operational risks. The report also provides a comprehensive assessment on the resilience of the banking sector through an in-depth analysis of key profitability and solvency indicators, in addition to a general overview on the infrastructure of the sectors’ payment and settlements systems.

Besides its main topics, the report also tackles specific topics in its boxes relating to challenges and developments faced by the banking sector on both the local and global front. In light of the global discussion on climate change and the increasing efforts to deal with its consequences, the report examines the potential effects on the domestic economy and banking sector. This includes the efforts put forth on a national level, and CBK’s role in building capabilities and promoting cooperation among relevant parties to reinforce financial stability in the face of environmental risks.

Moreover, and given the ever-shifting and highly uncertain economic environment in the post-Covid world, the report presents CBK’s efforts in updating its institutional framework. This comes coupled with the utilization of the latest technological advances to enhance analytical and forecasting capabilities of global developments, enabling more proactive policymaking.

The report also includes in one of its boxes an examination on the Basel Committee on Banking Supervision’s inclination to apply the standardized approach for the calculation of risk-weights expected to be implemented in 2023, and the potential effects of this change.

Finally, the report assesses growing cybersecurity risks in light of the global shift to digitization, which prompted CBK to introduce its Cybersecurity framework. The report also analyzes the effects of banks’ digital transformation on the overall operating environment, exploring potential implications on customer loyalty, operating efficiency, talent acquisition, and CBK’s role in incentivizing the banking sector to continue on this path.

The Governor concluded that the Financial Stability Report will be available on CBK’s website for all interested parties.

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