Kuwait: Financial System Stability Assessment

International Monetary Fund

No 2019/096, IMF Staff Country Reports from International Monetary Fund

Abstract: This Financial System Stability Assessment paper discusses that Kuwait’s limited economic diversification is directly reflected in the bank-centric financial sector. Banks have high concentrations to single borrowers, large depositors, and sectors, as well as significant common exposures. Risks to the financial sector are mostly external, stemming from oil price shocks, geopolitical tensions, and global financial developments. The risks are mitigated by sizeable sovereign financial assets, and by the ability of public entities to provide liquidity through large deposits. Stress tests suggest that banks are resilient to a wide range of shocks. The newly developed regulatory framework for capital market participants and products is an important step, but some gaps remain. The authorities have made important progress in strengthening the macroprudential framework. The crisis management framework and financial safety net arrangements should be strengthened and further operationalized. The diversification and resilience of the economy is expected to benefit from better financial inclusion of small-and-medium enterprises.

Keywords: ISCR; CR; banking sector; central bank; liquidity ratio; capital market; financial system; CBK well; risk profile; Shariah board; market operation; CBK monetary policy framework; CBK bill; liquidity coverage ratio; CBK power; Financial sector stability; Islamic banking; Commercial banks; Capital markets; Global; Middle East; North Africa; East Africa (search for similar items in EconPapers)
Pages: 38
Date: 2019-04-02
New Economics Papers: this item is included in nep-ara
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