Gulf state splits licences for lending, investment in bid to better regulate finance companies
Kuwaiti investment firms will need separate licences to operate their lending and investment businesses as the Gulf state central bank eliminates regulatory overlap with the newly formed Capital Markets Authority.
The decision was outlined in a central bank circular sent to investment firms last week.
The move is part of the country’s efforts to better regulate its financial markets and boost transparency and governance among investment firms.
"The Central Bank of Kuwait requests from investment firms to review their positions, assets and activities, and look into the possibility of fixing their positions, so that it is supervised by only one of the two parties," the central bank governor said in the circular.
Firms that choose to operate in financing will be regulated by the central bank, while those in investments and asset management will be regulated by the CMA, Sheikh Salem Abdul Aziz Al Sabah said in the document.
Firms that want to work in both fields will need to choose a primary activity for the existing company and obtain a new licence for the other one. In such cases, firms will be regulated by both the central bank and the markets authority.
The CMA, which was set up through a bill last year and came into effect in March, is Kuwait's first ever market regulator, addressing a gap that analysts had long said damped appetite to invest in the OPEC member.
The governor gave the firms one month to decide.
Kuwait's Union of Investment Companies (UIC), which incorporates 44 of the country's 105 investment firms, is still reviewing the central bank announcement, said a board member.
"This is an important decision that will have an effect on the future of the companies ... and one month is little time to decide on the fate of a firm," said Saleh al-Selmi, vice president of UIC.
Kuwaiti investment houses were hard hit during the financial crisis, which prompted the government of the world's fourth-largest oil exporter to approve a rescue package worth KD1.5bn ($5.45bn) in 2009.
"It could be healthy ... and it could give investment firms the opportunity to specialise in certain operations," said Naser al-Nafisi, general manager for Al Joman Centre for Economic Consultancy.
Kuwait is home to some of the largest investment houses in the Gulf region such as Kuwait Projects Co (KIPCO) and Global Investment House.