“Within the effort aimed at keeping up with the latest in international banking supervisory criteria meant to bolster governance criteria at banks, the Central Bank of Kuwait (CBK) Board agreed in its meeting June 19, 2012, to issue new directives regarding ‘governance rules and regulations at Kuwaiti banks’,” said CBK Governor Dr. Mohammad Al Hashel, Wednesday.
The governor added the new directives are to over-write the instructions issued by CBK on ‘sound management principles for banks and financial institutions’ back in May, 3, 2004.
Al Hashel said the new instructions include improvements on the regulations in view of the global financial crisis and the recent governance regulations adopted around the world. It specifically incorporates findings and information included in the Basel Committee’s paper on “Principles for enhancing corporate governance”, issued in 2010, the Financial Stability Board’s principles on allowances, and the World Bank team report on assessment of governance criteria at Kuwaiti banks issued late 2010, commissioned by CBK.
Al Hashel added that the instructions also kept in mind the structure of the Kuwaiti banking sector, the basic peculiarities of the national economy, and the level of the Kuwaiti economy’s integration with the global economy as well as other factors.
The instructions covered the main topics in bank governance such as the role played by the board. The board must honor its obligations to the overall institution in full, and this includes defining strategic goals, constantly improving governance standards, actively taking part in management, protecting shareholders’ interests and those of all parties involved, and focusing on risk management, as well as buttressing internal supervision and the systems for internal and external auditing.
The instructions stress independence of the board to ensure issues are discussed and decisions are taken objectively, without compromising the interests of the minority. There is also stress on the board’s duty to promote confidence in bank management by making sure profitability is not the lone concern but one which goes hand in hand with interests of depositors and overall monetary stability.
On the supervisory role of boards and active supervision on executive management, he said there was proposal on formation of committees stemming from the board of directors to monitor the bank’s sensitive operations.
The CBK governor also pointed out there was an update on regulations regarding allowances and bonuses and the need to assess these in proportion to bank performance and long-term risk management, as well as short-term risk management. This is in addition to bolstering transparency and enhancing announcement of data criteria, along with stressing values and ethics as important factors where governance is concerned.
The bank had conducted surveys to assess local banks’ assessment and observations regarding the new regulations, he noted, and the feedback was considered as seen fit.
Al Hashel said the new guidelines are effective as of July 1, 2013. Till then, banks are required to present CBK with quarterly reports on policies, measures, and adjustments introduced as of September 2012 leading to the “timely and full implementation” of the new criteria.
The governor expressed confidence the banks would be able to implement the new regulations, since they are in effect the minimum acceptable in governance, stressing that adequate governance is essential for consolidating trust in the banking sector on local and international level. This implementation also entails, he said, improvement in banks’ operating environment and enhancing overall local economic performance, KUNA reported.
