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Thu 29 Sep 2016 10:21 AM

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Kuwait central bank governor defends country’s finance laws

Mohammad Yousef Al Hashel dismisses claims from Kuwait Commercial Bank of ‘restrictive’ regulation

Kuwait central bank governor defends country’s finance laws
Kuwaits Central Bank Governor, Mohammad Yousef al-Hashel

The governor of the Central Bank of Kuwait has hit back at complaints from the private sector that banking regulations are “restrictive” and suffocate growth.

Dr Mohammad Yousef Al Hashel intervened in a public address by Kuwait Commercial Bank chairman Ali Mousa Mohammed Al Mousa in which he urged the government to relax existing regulations to stimulate investment.

Kuwaiti banking laws are too restrictive, Al Mousa told the Euromoney conference in Kuwait City on Tuesday.

The governor intervened to point out “mistakes” in Al Mousa’s speech in what became an unyielding exchange between the two.

“His claim that the rules are overly restrictive is incorrect,” said Al Hashel. “By definition, regulation is supposed to be restrictive – it is a way of organising the system to prevent [market players] from taking excessive, uncalculated risks.

“However, we are trying to strike a balance to give banks the breathing space to innovate and experiment and we believe we have succeeded as the sector continues to grow despite a challenging fiscal environment.”

“The phrase ‘restrictive regulation’ is not in our dictionary,” he said.

Al Mousa appeared to reject the rebuttal and Al Hashel added: “The framework must be solid enough to prevent crises – which are way, way more expensive than any regulatory requirement.”

The governor also provided information about bond issuances by Central Bank of Kuwait aimed at managing liquidity and plugging a budget deficit that the International Monetary Fund estimates will reach 13.5 percent of economic output this year.

Kuwait plans to raise $9.9 billion from global debt markets, it was reported earlier this month.

Al Hashel told the conference the level of issuances by Central Bank of Kuwait had risen from KD1.587 billion as of March to KD2.717 billion today – “which means we have an extra KD1 billion to finance our deficit”.

Meanwhile, Kuwait Stock Exchange (KSE), the company that oversees the country’s exchange, is to be dissolved this week to enable Boursa Kuwait Securities Company (BKSC) to assume responsibility for KSE’s activities and pave the way for a planned initial public offering of the exchange.

BKSC was established in 2014 to oversee the KSE privatisation plans. Its vice-chairman CEO, Khaled Abdulrazzaq Al Khaled, said the company is currently drafting the rulebook for a privatised exchange, including regulations for a market maker, and intends to publish these by December.

Throughout 2017, it intends to consult with stakeholders on plans for market segmentation and regulations around short-selling and stock market lending and borrowing. He also revealed the stock exchange will introduce a limit of 20 percent for the maximum daily rise or fall of individual stocks by November.

“We are focussing on enhancing liquidity in the region by adopting global standards in stock market regulation and encouraging new firms to list,” Al Khaled said.

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