Central Bank: No reliance on vouchers secured against state assets as collateral for credit facilities

The Central Bank of Kuwait has issued a circular to its regulated entities instructing them not to accept state property vouchers as collateral for loans. According to the circular, addressed to all local banks, investment companies, and financing firms, the text reads: “With reference to the Central Bank of Kuwait’s directives regarding the rationalization and regulation of credit and financing policies, and given the importance of considering the nature of the collateral provided, its ability to mitigate credit risk, and its enforceability and liquidity when needed, prudent practice dictates that state property vouchers should not be relied upon as collateral for credit facilities or financing operations granted to customers, nor should they be included in the collateral counted toward meeting relevant regulatory requirements when preparing and submitting periodic reports in future periods.”

The Central Bank emphasized the importance of conducting a comprehensive assessment of credit facilities granted against such collateral, if any, and evaluating the need to provide additional acceptable collateral within an adequate timeframe, in accordance with the provisions of the directives.