The Monetary Law, the Central Bank of Kuwait and the Organization of the Banking Profession prohibit any bank from stopping its operations or merging with another bank unless it obtains a previous license from the Minister of Finance based on the recommendation of the Board of Directors of the Central Bank of Kuwait. The board of directors of the Central Bank must verify that the bank, in this case, fulfills all its obligations towards its customers and creditors, in accordance with the general provisions it sets in this regard. The law also sets the controls through which banks may be written off and liquidated.
Cases of bank write-off from the register
Article 63 of the Monetary Law, the Central Bank of Kuwait and the Organization of the Banking Profession mentioned the cases of striking off the bank from the register of banks, which are:
- On request
- If he did not start his business within a year from the date of its notification of the decision to register it in the Banks Register
- If it declares bankruptcy
- If it merges with another bank
- If it ceases to practice his activity, or if its liquidity or solvency is at risk
- If it performs an act in violation of the provisions of the law
Notify the bank of a proposal to write it off
It is not permissible to propose the deletion of any bank that has ceased to practice its activities, or whose liquidity or solvency is at risk, or who has done an act in violation of the provisions of the law, except after being notified of this proposal and given an opportunity to comment on it. The Minister of Finance issues a decision to write off the bank based on the proposal of the Board of Directors of the Central Bank, and the decision is considered effective from the date of its publication in the Official Gazette.
Actions taken by the Board of Directors of the Central Bank before writing off any bank
The Currency and Central Bank of Kuwait Law and the Organization of the Banking Profession in Article 64 of it permits the Central Bank Board of Directors to take several measures before proposing to write off any bank whose liquidity or solvency is at risk from the bank’s register, which are as follows:
- Preventing the bank from carrying out certain operations, or setting limits on the business of the bank
- Appointing a temporary supervisor on the bank to monitor the progress of the bank in its activities
- That the central bank takes over the management of the bank for an appropriate period after which it decides either the bank’s ability to continue carrying out its activities by itself, or the necessity of striking off the bank from the bank’s register and liquidating it, and the management expenses are on the account of the managed bank.
Protecting the rights of deposit holders
The Central Bank may request the competent court to issue a decision to prevent taking any measures against the concerned bank, and to stop all lawsuits filed against it if it considers this to protect the rights of deposit holders, and this decision shall remain in effect for one year.
Article 65 of the law stipulates that every bank that is issued a decision to remove it from the bank registry shall inevitably be liquidated.
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