The Central Bank of Kuwait’s instructions regarding the financing operations provided by Islamic banks for the operations of trading in shares in the Kuwait Stock Exchange stipulated that the financing operations for the purchase of securities provided by Islamic banks shall be subject to the same principles and rules that govern the financing operations provided for other purposes, and Islamic banks must comply with Full of what is included in the instructions for rationalizing and regulating the financing policy of Islamic banks.
The commitment of Islamic banks to the rules of rationalization and regulation of financing policy
When providing financing operations within the privatization program, banks must abide by the principles and rules contained in the instructions for rationalizing and regulating the financing policy of Islamic banks, especially with regard to the importance of preparing a comprehensive and integrated study, the clarity of the purpose for which these operations are required, and the exact amount of financing required. With grants, the maturity date of the operations and the sources of payment, according to the results of the study of the client’s conditions, and not allowing the authorized limit to be exceeded, taking into account, for the operations carried out through auction, the feasibility of the granted financing, on the basis of a study submitted by the client clarifying the economic feasibility of Buy it for a significant stake in a particular company.
The need for diversity of guarantees
The instructions emphasized the need to diversify the guarantees obtained in exchange for financing operations for the purchase of securities and not to rely only on mortgaging the shares whose purchase is being financed, and to re-evaluate these guarantees on an ongoing basis to determine their sufficiency to face the risks of non-payment.
Maximum volume of financing operations
The maximum size of the financing operations used in trading in shares in the Kuwait Stock Exchange shall be no more than 10% of the total financing portfolio provided to resident clients, or 25% of the bank’s capital in its comprehensive sense (according to the instructions issued regarding the capital adequacy standard Islamic banks) whichever is less.
This percentage excludes financing operations provided by Islamic banks for the purpose of financing purchases of shares that take place within the framework of the privatization program, whether through auction or public subscription.
Banning the use of customer funds
Banks are prohibited from using clients’ money in the context of managing third parties’ portfolios, in providing financing for stock trading operations in the Kuwait Stock Exchange.
Central Bank control over financing operations for the purchase of securities
Islamic banks must provide the Central Bank with detailed data on financing operations directed for the purposes of trading in shares listed on the Kuwait Stock Exchange, according to the form prepared for this, on a monthly basis, provided that such data is submitted within five working days from the date taken as a basis for preparing the statement.
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