Central Bank of Kuwait Issues Digital Bank Guidelines, Initial Approvals Promised in 2022

The Central Bank of Kuwait this week released guidelines for digital banks. They said this falls within its overall efforts to utilize the latest advancements to bolster financial stability, encourage innovation, and meet future economic needs.

Governor Dr. Mohammad Y. Al-Hashel said guaranteeing the smooth operation of the banking business is among the Central Bank of Kuwait’s top priorities. As the banking industry undergoes transformation, new business models enable better and more accessible services to customers thanks to the immense potential of digital technology. The Central Bank of Kuwait was therefore keen to develop a digital banking framework to enable and support digital banks.

The guidelines were developed after studying the regulatory approaches of 25 central banks and the business models of 40 digital banks.

Al-Hashel said digital banks function within three main models; as a unit within a traditional bank, or as a partnership between such bank and a digital institution where the bank handles core banking operations while the second party handles relations with customers, trademark, and other areas of operation and service. The third model is establishment of a standalone digital bank.

The Central Bank of Kuwait has opened the application process, which concludes June 30. The evaluation process will run through the end of 2022, with any initial approvals granted before Dec. 31.

The guidelines come in five parts covering the definition of digital banks, their legal framework, and licensed activities, as well as phases and procedures for establishment of digital banks as per the application form available through the Central Bank of Kuwait’s website, and the supervisory and regulatory instructions and controls, also available through the website.

Al-Hashel said the Central Bank of Kuwait anticipates digital banks will create added value through innovative business models geared to the service of the economy and the public good through targeted access and responsible use of innovative financial solutions.

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