The Central Bank of Kuwait has determined the procedures for opening branches of Islamic banks, which local Islamic banks must abide by when they wish to open bank branches inside and outside the State of Kuwait.

Procedures for opening branches of Islamic banks inside Kuwait

The bank wishing to open a bank branch submits a written request to the Central Bank in this regard, accompanied by a study on the feasibility of opening the branch, and the extent to which the area in which the branch is requested to open needs banking services, provided that this study covers – at least – the following points:

1- Motives for opening the required branch.

2- The extent to which the area in which the opening of a branch is requested needs banking services, and the considerations on the basis of which the location of the required branch was selected.

3- Expectations regarding an increase in banking services in that region, and the period after which the branch’s activity is expected to be comfortable.

4- The extent to which the region needs the activity of more than one branch if one of the other banks wishes to open a branch there.

5- The extent to which the activity of the required branch affects the activity of other branches of the bank, as well as the activity of the head office.

6- Financial estimates on the required branch, represented mainly in the volume of the expected activity of the new branch and its development, the cost of construction, and the costs and results of the activity over an appropriate period of time not less than three years.

7- Any other matters that the bank took into account when deciding to open the branch.

Requests received by the Central Bank by government agencies and institutions to establish bank branches in certain regions

1- In the event that the Central Bank receives a request from any of the governmental authorities regarding its desire to have branches of local banks in certain areas, it directs this request to the Federation of Kuwaiti Banks, which in turn circulates this request to all local banks to determine their desire in this regard.

2- In the event that more than one bank desires to establish a branch in the relevant region, the Central Bank will differentiate between them according to a set of control criteria, including the value of the capital for each bank branch (the value of shareholders’ equity / the number of operating and under establishment branches at home and abroad.

3- After selecting the bank, the Central Bank will notify the requesting government authority of the name of the bank, as well as notify the concerned bank to take the necessary action towards contacting the aforementioned authority to agree on all matters to be negotiated in such cases.

4- After completing the procedures referred to in clause (3) above, the concerned bank submits an application to the Central Bank of Kuwait to obtain its approval to establish the required branch, accompanied by the documents supporting the procedures referred to, as well as a feasibility study for opening this branch.

Procedures for opening branches of Islamic banks outside the State of Kuwait

Local Islamic banks wishing to open bank branches outside the State of Kuwait must take into account the following:

1- Adhere to the Central Bank of Kuwait’s instructions regarding the necessity of informing the Central Bank before initiating any contacts with financial or banking supervisory authorities in other countries.

2- Submit directly to the Central Bank of Kuwait a request to establish the required branch abroad, attaching to it the economic feasibility study for establishing the branch that fulfills all the necessary elements in this regard, the most important of which are the financial estimates of the volume of the expected activity of the branch and the cost of its establishment, and the costs and results of the activity over an appropriate period of time not less than three years The motives for establishing the branch and the expected benefits from its establishment, relations and the volume of trade, financial and tourism exchange with the guest country, and the necessary information about the general economic and political conditions in the host country.

Regulatory Standards

The Central Bank of Kuwait, when studying the request of any of the banks to open new bank branches (whether at home or abroad), will take into consideration some regulatory standards, including the following:

1- Assessment of the general condition of the bank.

2- The adequacy and efficiency of the bank’s internal control system, the information flow system between branches and the bank’s management.

3- The extent of the bank’s commitment to the laws and supervisory instructions issued by the Central Bank, and the absence of any violations that have a significant negative impact or are characterized by repetition.

4- Any other considerations or matters related to it.

Central Bank approval to open branches of Islamic banks inside and outside Kuwait

If the Central Bank approves the request of the requesting bank, then this approval is considered preliminary, and it is valid for a period of one (1) year from the date of its issuance for branches inside and outside the State of Kuwait, and the concerned bank shall then work to take the necessary measures towards opening the branch before the end of the aforementioned period .

If the bank is unable to open its new branch in the period prescribed for it as indicated, the matter requires submitting a request to the Central Bank of Kuwait to extend the approval period before its expiry, stating its justifications for requesting an extension of the period, and in the event of non-compliance, the approval will be automatically canceled upon expiration date.

Application for registration of the branch in the register of Islamic banks

When the bank completes preparing the location of the new branch and setting the date for its opening, it shall submit to the Central Bank a request to amend data in the Islamic Banks Register to register the branch in the register, fifteen days prior to the opening date, accompanied by an evidence of obtaining the necessary licenses and approvals from the relevant authorities It is not permissible to start the activity in the new branch before it is entered in the register of Islamic banks at the Central Bank of Kuwait.

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