Press Releases

H.E. Sheikh Salem Abdulaziz Al-Sabah, the Governor of CBK has stated that the Council of Ministers on 11 April 2004 approved the CBK proposal to remove the Government guarantee from deposits at local banks and directed CBK to take the necessary appropriate measure in this regard. Accordingly, the Government guarantee of deposits shall be removed as from Monday 26th of April 2004.

H.E. added that this decision aims at enhancing competition and elevating the efficiency of the banking system and eventually shall benefit bank depositors, shareholders and customers. This Government guarantee was part of the State efforts to resolve financial crises that struck the banking system in particular and the national economy in general, starting from the collapse of the securities market in 1982 (Al-Manakh Crisis) to the occupation of the State of Kuwait by the defunct Iraqi regime in 1990. This deposit guarantee was an integral part of the measures taken then to sustain the banking system and was declared in both the Difficult Credit Facilities Settlement Program of August 1986, as well as in Decree Law No. 32 of 1992 concerning resolution of financial and banking system problems.

H.E. the Governor emphasized that local banks have considerably improved their financial positions with above par financial ratios of solvency, liquidity and profitability. These banks are well able now to safeguard their customer deposits on their own. Sound financial position together with good governance based on efficient internal control and risk management systems constitute the real guarantee of depositors? as well as shareholders? funds at local banks. Moreover, the pre-emptive approach of effective supervision carried out by the Central Bank of Kuwait shall always ensure safeguarding the financial soundness of local banks and in turn the stability and protection of depositors funds.

H.E. the Governor stated that although local banks are now capable of dealing with any unfavorable reactions to the removal of Government guarantee of deposits Government, CBK in collaboration with local banks is currently considering several alternatives to establish a system for protection of small deposits.