Governor of the Central Bank of Kuwait (CBK) Mohammad Y. Al-Hashel announced Tuesday that CBK's Board of Directors has approved the instructions for implementing the Leverage Ratio Standards to Kuwaiti banks, both conventional and Islamic.
As per the new instructions, Banks' leverage ratio should not exceed three percent, Al-Hashel said in a press statement, adding that the new instruction would be effective as of 31 December 2014.
He stated that the implementation of the Leverage Ratio Standards comes within the framework of the CBK's measures to fully apply the International regulatory framework for banks (Basel III) reforms and guidelines. It also aims to keep abreast of the developments in field of banks control, he said.
The leverage ratio is the proportion of debts that a bank has compared to its equity/capital.
The Governor pointed out that the CBK, through the new instructions, seeks to curb the accumulation of leverage ratio in the banking sector which could put pressures on the financial system or the whole economy. It also aims to boost capital adequacy requirements.
Al-Hashel reiterated that the CBK is firmly committed to complete implementing Basel III reforms and guidelines.
The CBK is moving forward toward accomplishing the other standards of Basel III set of reforms, liquidity ratios standards, according to a well-planned schedule and taking into consideration the comprehensive quantitative impact study (QIS) outcomes, he said.
The Governor said that final Basel III Leverage ratio standard instructions are now published on the CBK website for those interested in the banking and financial business.
"Basel III" is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to: improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source; improve risk management and governance; strengthen banks' transparency and disclosures.