According to the Central Bank of Kuwait (CBK) and based
on recent economic, monetary and banking activity, Kuwait
continues to maintain a moderate growth in domestic economic
activity. This activity has been supported by public
expenditure, particularly capital expenditure, despite low
crude oil prices. The CBK has noted that the last year has been
characterised by soundness of financial positions in the local
banking sector and modest growth and improvement in the key
monetary aggregates and indicators as a reflection of the
domestic economic activity.
Notable in this respect, the Kuwaiti government established
its Global Medium Term Note (GMTN) Programme in early 2017. The
Notes were issued on March 20 2017 and comprised $3.5 billion
Notes due in 2022 and $4.5 billion Notes due in 2027. It is
contemplated that the proceeds will be used to finance the
deficit in the budget left by the low oil price.
It should be noted also that several Kuwaiti and regional
conventional and Islamic banks issued bonds and sukuk under the
Capital Markets Authority's by-laws in order to comply with
Basel III capital adequacy requirements.
Below is the summary of the developments in the banking
sector in Kuwait.
Law 20 of 2014 on Electronic Transactions (the Electronic
Transactions Law) allowed for (among other things) electronic
signatures to be used in commercial transactions. The
Electronic Transactions Law is largely modelled on the UNICTRAL
model law and requires that accredited service providers
certify electronic signatures as evidence of authenticity.
Article 20 of the Electronic Transactions Law provides that
the person providing an electronic signature must provide the
electronic authentication certificate. Such accredited service
providers are to be licensed by an appropriate authority in
Kuwait in co-ordination with the Public Authority for Civil
Pursuant to Article 22 of the Electronic Transactions Law,
such authority will regulate the process of providing
electronic certification and electronic signature services.
Article 1 of the Executive Bylaws provides that the
"appropriate authority shall be the entity engaged by the
Council of Ministers to oversee the issuance of licences and
approvals required for the conduct of electronic certification
services, electronic signature and other activities related to
electronic transactions and information".
We note that Chapter 6 of the Electronic Transactions Law
deals specifically with Electronic payments (i.e. Articles 28
to 31). While electronic transfers of money are permitted,
entities involved in the same are required to comply with the
provisions of Law 32 of 1968, which established the Central
Bank of Kuwait and banking regulation, and with money
laundering laws and regulations. Additionally, such entities
are required to take proper steps and procedures to ensure the
safety and security of their customer's transactions.
Pursuant to Council of Ministers Resolution 1659 of 2014,
the Central Agency for Information Technology was appointed to
oversee the issuance of licences and approvals required for the
conduct of electronic certification services, electronic
signatures and other activities related to electronic
transactions and information except for the supervision and
administration of Root Certification (as defined in the
executive regulations). Pursuant to Council of Ministers
Resolution 1660 of 2014, the Public Authority for Civil
Information was nominated to supervise and administer
(including licensing) root certification. While we note that
electronic signatures are not being used to widely in Kuwait,
we are aware that there are companies that are being licensed
to provide such services over the past year.
Collateral System for Financial Brokerage
A notable development in the capital markets is the
implementation of a new collateral system for financial
Under the Capital Markets Authority (CMA) Resolution 72 of
2016, in the event of a failure to settle any securities
transaction in the timelines specified by the CMA, the broker,
custodian or clearing agency may cover any obligations through
financial guarantees provided by them. Any such guarantees
should have a buy-in with a specific maximum time to allow a
roll over and should provide enough cash to complete a close
Furthermore, the CMA passed Resolution 95 of 2016 to
implement the collateral system for brokerage firms and
cancelled the previous brokerage guarantee system, effective
from April 1 2017.
Adoption of a new post-trade model by the
Under CMA Resolution 72 of 2016, in addition to the ability
to guarantee settlement obligations by licensed persons, the
CMA adopted a new post trade model to align post-trade
practices with international standards.
Under the new model, the settlement cycle for all traders is
trading day plus three business days. A delivery versus payment
system was adopted, as approved by the Bank for International
Settlements and all complete cash settlements relating to
securities are to be settled through financial institutions
licensed by the CBK. Licensed persons are to segregate their
client accounts in omnibus accounts using appropriate numbering
in accordance with rules to be issued by the CMA. (However,
clients of qualified brokers registered on Boursa Kuwait shall
be exempt from fees payable for their assets to omnibus
accounts for a period of two months from the start of any
activity to transfer such assets.) And finally, custodians have
the ability to approve or reject each trade during a specified
period according to rules of clearing specified by the CMA.
We expect that the CMA may issue more detailed rules to
implement the newly adopted post-trade model.
Partner, ASAR – Al Ruwayeh &
Kuwait City, Kuwait
T: +965 2292 2700
Ibrahim Sattout is a partner at ASAR – Al
Ruwayeh & Partners. He has over 23 years of
experience, 16 years of which have been spent in
Sattout's experience includes banking and finance,
public and private partnerships, government projects,
commercial and corporate, acquisition transactions,
capital markets and arbitration. He has been
extensively involved as lead and co-counsel for the
Kuwaiti government, local and foreign investors and
lenders on the major BOT and PPP projects undertaken in
Kuwait in addition to acquisition transactions, debt
and equity arrangements and financing transactions.
He has led ASAR team that advised the Partnerships
Technical Bureau (PTB) and the Ministry of Electricity
and Water (MEW), in respect to the structuring and
procurement of the Az Zour North IWPP Phase 1.
He is currently the lead counsel of the ASAR team
advising Kuwait Authority for partnership projects and
the MEW as part of the transaction advisor, on all
local legal aspects of the Az Zour North IWPP Phase 2
and the Al Khairan IWPP Phase 1.
He is fluent in English, Arabic and French
Associate, ASAR – Al Ruwayeh &
Kuwait City, Kuwait
T: +965 2292 2700
Brenda Ntambirweki is an Associate with ASAR
– Al Ruwayeh and Partners and has eight years
of experience. She is routinely involved in mergers and
acquisitions, restructuring and insolvency, and banking
and finance transactions. Her recent experience
includes an acquisition purchase of certain assets and
transfer of employees in a sale of business
transaction; a facility to subsidiaries of a Kuwaiti
shipping company which also acted as guarantor; the
sale of five A330 airbus aircraft that were leased to a
Kuwaiti airline and the restructuring of a Kuwaiti
investment company’s debts through a debt
for asset swap.