Law No. 32 of 1968 on Currency, the Central Bank of Kuwait and the Regulation of the Banking Profession

Law No. 32 of 1968
on Currency, the Central Bank of Kuwait and the Regulation of the Banking Profession

Part One
Currency

Section One – The Unit of Currency and its Parity

Article 1

The unit of currency is the Kuwaiti Dinar, which is divided into one thousand fils.

Article 2

The bases of the exchange rate of the Kuwaiti Dinar shall be determined by Decree, after taking the opinion of the Governor of the Central Bank.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 3

1 – Every transaction or agreement relating to currency or to payment in currency shall be deemed to have been concluded, and agreed to be performed, on the basis of the Kuwaiti Dinar, unless otherwise expressly agreed.
2 – Whenever necessary, the Central Bank shall announce, for all legal purposes it specifies, including the collection of fees, the exchange rate of the principal foreign currencies on the basis of the rate announced by the International Monetary Fund, or on any other basis it deems fit.
* Paragraph (2) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Two – Issue of Banknotes and Coins

Article 4

1 – The issue of currency is a privilege reserved to the State and exercised exclusively by the Central Bank.
2 – No entity other than the Central Bank may issue or put into circulation banknotes or coins, or any bond or instrument payable to bearer on demand and capable of circulating as legal tender, with the intention that such instruments be used as a means of payment in place of the currency issued in accordance with the provisions of this Law.
3 – Whoever contravenes the provisions of this Article shall be liable to the penalties prescribed in the Penal Code for the counterfeiting of banknotes or the forgery of coins.

Article 5

1 – The Central Bank may issue banknotes of the following denominations: (one dinar, five dinars, ten dinars), or of higher denominations to be determined by Decree upon the submission of the Minister of Finance and the proposal of the Board of Directors of the Central Bank.
2 – The aforesaid banknotes shall bear the signatures of the Minister of Finance and the Governor of the Central Bank.
3 – The banknotes referred to in this Article shall be unlimited legal tender in the State of Kuwait for the payment of any amount whatsoever.
* Paragraph (1) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 6

1 – The Central Bank may issue banknotes of a value lower than the monetary unit, in the denominations of half a dinar and a quarter of a dinar.
2 – The aforesaid banknotes shall bear the signatures of the Minister of Finance and the Governor of the Central Bank.
3 – The banknotes referred to in this Article shall be legal tender for the payment of any amount in the State of Kuwait within the following limits:
a – Twenty dinars for notes of the half-dinar denomination.
b – Ten dinars for notes of the quarter-dinar denomination.
4 – The Central Bank, the State cash desks and the cash desks of the banks operating in the State of Kuwait shall accept the small banknotes without any limit as to quantity.

Article 7

1 – The Central Bank may issue metal coins.
2 – Non-gold metal coins shall be legal tender in the State of Kuwait, with the power to discharge any amount up to two dinars, and the Central Bank shall be bound to accept them without any limit as to amount.
3 – The Central Bank may determine the conditions for the sale and purchase of gold coins from its cash desks.
4 – The Central Bank may issue commemorative coins, in gold and otherwise, and the Bank shall determine the conditions for the sale and purchase of the coins it issues.
5 – Whoever refuses to accept the Kuwaiti currency provided for in this Article and the two preceding Articles at its circulating value and within the limits of its legal tender power shall be liable to a fine not exceeding one hundred dinars.
* Paragraphs (4) and (5) added by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 8

The Council of Ministers shall determine, upon the recommendation of the Central Bank:
1 – The wording on banknotes denoting their value, as well as the form and design of the notes and their other features.
2 – The denominations of the metal coins issued by the Central Bank, their shapes, design and standard weights, the permitted tolerance in weight and fineness, and their other specifications.

Section Three – Circulation and Withdrawal of Banknotes and Coins

First – Banknotes

Article 9

The various denominations of new banknotes shall be put into circulation by a resolution of the Board of Directors of the Central Bank specifying their descriptions and denominations. The resolution shall be published in the Official Gazette and announced to the public by the appropriate means of publication.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 10

1 – The Board of Directors of the Central Bank may, with the approval of the Minister of Finance, decide to withdraw any denomination of banknotes from circulation against payment of its face value.
The resolution shall be published in the Official Gazette and announced to the public by the appropriate means of publication.
The withdrawal resolution shall fix a period for the exchange of the withdrawn banknotes of not less than 90 days in ordinary circumstances and not less than fifteen days in cases of urgent necessity.
Upon the expiry of the exchange period fixed in the withdrawal resolution, the withdrawn banknotes shall cease to be legal tender and may no longer be dealt in; however, their holders shall have the right to exchange them at the cash desks of the Central Bank within ten years from the date on which the withdrawal resolution came into force. If they are not exchanged within that period, their value shall be deducted from the currency in circulation and added to the account provided for in Article (48) of this Law.
By way of exception to the periods referred to in the preceding clause, 30/9/1991 is fixed as the final date for the obligation of the Central Bank to exchange the banknotes whose withdrawal is decided within one month from the date on which this Law comes into force.
2 – The Central Bank shall not be bound to refund the value of lost or stolen banknotes, or to accept forged banknotes or pay their value.
3 – The Central Bank shall pay the value of defaced or mutilated banknotes in accordance with the instructions it issues; banknotes that do not satisfy the conditions laid down in those instructions shall be withdrawn from circulation without compensation.
4 – The Central Bank shall destroy the banknotes withdrawn from circulation in accordance with the instructions it issues in this respect.
* The last paragraph of clause (1) added by Decree-Law No. 5 of 1991 (Kuwait Al-Youm, Issue No. 3, 18 March 1991).

Second – Non-Gold Coins

Article 11

1 – The various denominations of non-gold coins shall be put into circulation by a resolution of the Board of Directors of the Central Bank specifying the descriptions of those coins. The resolution shall be published in the Official Gazette and announced to the public by the appropriate means of publication.
2 – Any denomination of these coins may be withdrawn against payment of its face value. The withdrawal shall be made by a resolution of the Board of Directors of the Central Bank, published in the Official Gazette and announced to the public by the appropriate means of publication.
3 – The withdrawal resolution shall fix an exchange period of not less than six months.
4 – Coins not presented for exchange within the said period shall cease to be legal tender, and their value shall be deducted from the currency in circulation and added to the special account provided for in Article (48) of this Law.
5 – Coins that have been defaced, clipped or reduced in weight, or whose features have been altered for any reason other than ordinary use, shall be withdrawn from circulation without compensation.
* Paragraph (1) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Four – Currency Cover

Article 12

The currency in circulation and the demand deposits held with the Central Bank shall be covered at all times by a cover consisting of the following:
a – Gold coins or bullion.
b – Demand or time deposits in freely convertible currencies, held with local banks or held abroad with central banks, state treasuries, the Bank for International Settlements, the International Monetary Fund or commercial banks.
c – Foreign instruments, bonds, bills or certificates issued or guaranteed by foreign governments, or issued or guaranteed by international financial or monetary organisations, provided that they are denominated in freely convertible currencies and are readily marketable in the financial markets.
d – Other foreign bonds or instruments, other than those issued or guaranteed by foreign governments or by international financial or monetary organisations, provided that they are denominated in freely convertible currencies and are readily marketable in the financial markets.
e – Commercial paper denominated in a freely convertible foreign currency and accepted by foreign commercial banks.
f – Bills and bonds issued or guaranteed by the Kuwaiti Government, and advances granted by the Central Bank to the treasury of the Kuwaiti Government.
g – Domestic commercial paper discounted with the Central Bank, and loans and advances granted to local banks against adequate collateral.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Part Two
The Central Bank of Kuwait

Section One – Establishment of the Central Bank

Article 13

A public institution with an independent legal personality is hereby established under the name of the “Central Bank of Kuwait”, referred to in this Law as the Central Bank.
The head office of the Bank shall be in Kuwait City. The Bank may open branches in the State of Kuwait and appoint agents and correspondents abroad.

Article 14

The Central Bank shall have a separate budget prepared on a commercial basis.
The Bank shall be deemed a merchant in its relations with third parties, and its operations shall be conducted and its accounts organised in accordance with commercial and banking rules.
Save for the constitutional provisions in force concerning the business, budget and final accounts of the Bank, the Board of Directors shall, with the approval of the Minister of Finance and Oil, lay down all other regulations and rules relating to the administrative and financial affairs of the Bank, including staff and accounting matters, without being bound in any of this by the provisions of the laws on public tenders and public civil service.
The provisions on prior control laid down by Law No. 30 of 1964 establishing the State Audit Bureau shall not apply to the business of the Central Bank. The task of the Bureau shall be confined to auditing the accounts and assets of the Bank, and it shall not interfere in any manner whatsoever in the conduct of the Bank’s business or question its policy. The technical officer of the State Audit Bureau who audits the Bank’s business shall be adequately qualified technically and shall have special experience in banking business.
* “its budget” pursuant to the corrigendum published in Kuwait Al-Youm (Issue No. 686, 21 July 1968).

Section Two – Objectives of the Central Bank

Article 15

The objectives of the Central Bank are:
1 – To exercise the privilege of issuing currency on behalf of the State.
2 – To endeavour to secure the stability of the Kuwaiti currency and its free convertibility into other foreign currencies.
3 – To endeavour to direct credit policy in a manner that assists economic and social progress and the growth of national income.
4 – To supervise the banking system in the State of Kuwait.
5 – To serve as banker to the Government.
6 – To provide financial advice to the Government.

Section Three – Capital and Reserves of the Central Bank

Article 16

The capital of the Central Bank is five million Kuwaiti Dinars, paid in full by the Government. The capital of the Bank may be increased by Decree, and the increase shall be taken from the general reserve of the Bank.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 17

1 – The Central Bank shall have a general reserve fund.
2 – At the end of each financial year, the net profit shall be the profits realised by the Bank after deducting expenses and the reserves required to meet bad or doubtful debts, the depreciation of assets, the contribution to the pension fund, and such other expenses as banks customarily provide for.
3 – The net profit of the Bank shall be disposed of as follows:
a – The net profit of the Bank shall be added to the general reserve fund until its balance reaches twenty-five million Kuwaiti Dinars. The balance of the general reserve fund may be increased beyond that limit by a resolution of the Board of Directors of the Central Bank, with the approval of the Minister of Finance.
b – When the balance of the general reserve fund reaches the maximum prescribed for it, the whole of the net profit shall accrue to the Government.
c – If in any year the general reserve fund is insufficient to cover the losses of the Bank, or is invested in a manner that does not permit its use to cover the losses, the Government shall make good the deficit.
* Paragraph (3) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Four – Management

Article 18

The Central Bank shall be administered by a Board of Directors composed of:
a – The Governor, who shall be the Chairman.
b – The Deputy Governor.
c – A representative of the Ministry of Finance.
d – A representative of the Ministry of Commerce and Industry.
e – Four other members.
All members of the Board shall be Kuwaiti nationals.
* The last paragraph replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 19

The Governor and the Deputy Governor shall be appointed by Decree, upon the submission of the Minister of Finance, for a renewable term of five years, and shall be persons of experience in banking business.
The salaries, emoluments, all allowances and financial entitlements of the Governor and the Deputy Governor shall be fixed by a resolution of the Council of Ministers upon the proposal of the Minister of Finance.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 20

1 – The Council of Ministers shall appoint the representatives of the Ministry of Finance and Oil and of the Ministry of Commerce and Industry, shall designate their alternates in their absence, and shall fix their remuneration, upon the proposal of the Competent Minister.
2 – The other members shall be appointed by Decree, upon the submission of the Minister of Finance, for a renewable term of three years, and shall be persons of experience in economic, financial or banking affairs.
Their remuneration shall be fixed by a resolution of the Council of Ministers upon the proposal of the Minister of Finance.
3 – The members referred to in the two preceding paragraphs may not be directors, managers or employees of any of the banks operating in the State of Kuwait.
* Paragraph (2) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 21

1 – The Governor shall have full powers to manage the business of the Central Bank and to issue the regulations and instructions relating thereto. He shall be responsible for ensuring the application of this Law and the regulations of the Bank and the implementation of the resolutions of the Board of Directors. He is the legal representative of the Bank and has the right to sign on its behalf. The Governor may, with the approval of the Board of Directors, delegate the Deputy Governor or any other officer of the Bank to exercise some of his powers.
2 – The Deputy Governor shall act in place of the Governor temporarily in his absence or if his post falls vacant.
3 – The Governor and the Deputy Governor shall devote themselves fully to their work at the Bank. Neither of them may, while in office, hold any other office, perform any work for anyone other than the Bank, with or without remuneration, participate in obligations contracted by the Government or public institutions, or combine his office with membership of the board of directors of any company.
Excepted from the foregoing is work on committees, institutions and bodies formed by the Government or by public institutions or bodies, as well as the work of international conferences.

Article 22

1 – No person may be a member of the Board of Directors of the Central Bank:
a – Who has previously been convicted of a crime involving dishonour or breach of trust.
b – Who has been declared bankrupt or has suspended payment.
2 – Apart from the cases provided for in the preceding paragraph, the service of any member of the Board of Directors may be terminated by Decree or by a resolution of the Council of Ministers, according to the manner of appointment, in the following two cases:
a – If he commits a serious breach of his duties or grave errors in the management of the Bank.
b – If he is absent from all meetings of the Board of Directors during three consecutive months without the approval of the Board, unless the absence is on official mission or by reason of annual or sick leave.

Article 23

The Board of Directors shall meet upon the invitation of the Governor. The Governor shall convene the Board if so requested by the Minister of Finance or by at least three members. The Board shall meet not less than eight times a year.

Article 24

A meeting of the Board shall be valid only if attended by at least five members, including the Governor or his deputy and the representative of the Ministry of Finance or his alternate.
Resolutions shall be passed by a majority of the votes of those present; in the event of a tie, the side on which the Chairman votes shall prevail.

Article 25

The Board of Directors may engage experts and may invite to its meetings, for consultation, any persons whose opinion it wishes to hear on a particular matter.

Article 26

The Board of Directors shall, within the limits of the provisions of this Law, exercise all the powers necessary for the performance of its task, and shall in particular:
a – Formulate the monetary and credit policy of the Bank.
b – Decide matters relating to the issue of currency, its circulation and its withdrawal from circulation.
c – Determine the system for the discount and rediscount of commercial paper and the granting of loans and advances, and specify the collateral required.
d – Fix the discount and rediscount rates and the interest and commissions charged by the Bank on loans and advances and on the discount of commercial paper.
e – Decide matters relating to the regulation of the banking profession and the rules for its supervision.
f – Deliberate on applications for advances submitted by the Government.
g – Fix the ceiling for loans and advances that may be granted to the banks operating in Kuwait.
h – Determine the amounts allocated for the purchase and discount of public loan bonds and Government treasury bills.
i – Establish clearing houses.
j – Establish a pension fund for officers and employees and determine the Bank’s contribution thereto.
k – Approve the annual estimates of revenue and expenditure.
l – Review periodically the position of the Bank and the progress of its operations.
m – Approve the annual balance sheet of the Bank and the profit and loss account and the final accounts. The approval of the Board of Directors of the estimates of revenue and expenditure, or of the balance sheet, the profit and loss account and the final accounts, shall be endorsed by the Minister of Finance and Oil.
n – Approve the annual report of the Bank submitted by the Governor to the Minister of Finance in accordance with the provisions of Article (50) of this Law.
o – Lay down the internal instructions relating to financial and administrative affairs and such other arrangements as it deems conducive to the sound management of the Bank.
p – Deal with all matters that this Law or any other law assigns to the competence of the Board of Directors.

Article 27

The representative of the Ministry of Finance on the Board of Directors may request the suspension of any resolution of the Board relating to monetary and credit policy in order to refer it to the Minister of Finance. If the Minister of Finance does not decide the matter within seven days from the date of suspension, the said resolution shall become effective.

Article 28

No member of the Board of Directors of the Central Bank, and no manager, officer or employee of the Bank, shall disclose any information relating to the affairs of the Bank or its customers, or to the affairs of the other banks subject to the supervision of the Central Bank, that has come to his knowledge by reason of his duties, except in the cases where the law so permits.
The information whose disclosure is prohibited shall be specified by a resolution of the Minister of Finance, after taking the opinion of the Board of Directors of the Central Bank.
Without prejudice to any severer penalty provided for in any other law, whoever contravenes the prohibition set out in the two preceding paragraphs shall be liable to imprisonment for a period not exceeding three months and a fine not exceeding two hundred and twenty-five dinars, or to either of these two penalties, together with dismissal in all cases.
* “or to either” pursuant to the corrigendum published in Kuwait Al-Youm (Issue No. 686, 21 July 1968).

Article 29

The Central Bank may not pay to or for the benefit of its staff any wage, salary, fee, bonus or remuneration calculated on the basis of the profits realised by the Bank.

Section Five – Operations of the Central Bank

First – Relations with the Government

Article 30

The Central Bank shall advise the Government with a view to facilitating the achievement of its objectives and tasks, and the Government shall consult it on matters relating to monetary and credit policy.

Article 31

The Central Bank shall act as banker and fiscal agent to the Government, and on that basis:
a – The Government’s funds in Kuwaiti Dinars in current accounts shall be deposited exclusively with the Bank, without any interest being paid thereon.
b – The Bank shall in general perform the banking operations and services relating to the Government, free of charge, inside and outside the country.
c – The Government may deposit funds in Kuwaiti Dinars with the local banks after taking the opinion of the Central Bank and in a manner not inconsistent with the monetary policy in force.
d – The Minister of Finance may entrust the Central Bank with the management of any other Government funds on such terms as may be agreed at the time.
e – The Ministry of Finance shall transfer to the Central Bank such amounts as are required to implement a particular monetary policy, after the Minister of Finance has approved that policy and the amounts required for it.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 32

1 – The provisions of paragraphs (a) and (b) of the preceding Article may be applied to municipalities and public institutions by a resolution of the Council of Ministers.
2 – By way of exception, these bodies may also be granted interest on their deposits, in which case they shall not benefit from the free performance of banking operations and services.
* “free performance” and “operations” pursuant to the corrigendum published in Kuwait Al-Youm (Issue No. 686, 21 July 1968).

Article 33

The Central Bank shall implement the laws and regulations relating to exchange control.

Article 34

The Central Bank shall carry out, directly or through the banks and other financial institutions, the operations relating to the sale and management of loan bonds issued or guaranteed by the Government.
It may also carry out the operations relating to the sale and management of loan bonds issued in Kuwaiti Dinars by any public authority or institution in Kuwait.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 35

The Central Bank may, in accordance with the provisions of Article (26/h) of this Law:
a – Buy, sell, discount and rediscount Government treasury bills.
b – Buy and sell the public loan bonds issued by the Government and offered for sale.

Article 36

The Central Bank may not grant any loan to the Government, municipalities, or public authorities and institutions, except in the following case:
It may grant the Government temporary advances to cover a deficit in the revenue of the general budget, on which the Government shall pay the interest fixed by the Board of Directors of the Bank in agreement with the Minister of Finance.
The total of such advances may not at any time exceed ten per cent of the public revenue of the State budget for the preceding financial year.
Such advances shall be repaid as soon as possible. If they are not repaid by the end of the financial year following the year in which they were granted, the Bank shall not grant new advances until the outstanding advances have been repaid.

Article 37

In order to contribute to the financing of development projects or to strengthen the financial market, the Central Bank may, with the approval of the Minister of Finance:
1 – Acquire or sell the shares or bonds of any Kuwaiti shareholding company, concession company in Kuwait, or public institution.
2 – Lend to banks or to public financial or credit institutions against the security of such shares or bonds held by them.
The total of the amounts allocated for acquiring the shares and bonds referred to above, or for lending against the security of their ownership, may not exceed the value of the Bank’s reserves.
3 – Issue negotiable bonds.
* “for acquiring” pursuant to the corrigendum published in Kuwait Al-Youm (Issue No. 686, 21 July 1968); clause (3) added by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 38

1 – The Governor shall keep the Minister of Finance regularly informed of the monetary and credit policy pursued by the Bank or which it intends to pursue.
2 – If the Minister of Finance holds a different view, he may issue general directives which the Bank is bound to follow, and such directives shall be binding on the Bank.
3 – If the Board of Directors objects to such directives, it may submit its objections and the reasons for them in writing to the Minister, who shall refer them, together with the directives he has issued, to the Council of Ministers to decide the matter.
The decision of the Council of Ministers on the matter shall be final.
* “and credit” pursuant to the corrigendum published in Kuwait Al-Youm (Issue No. 686, 21 July 1968).

Article 39

Government departments, public institutions and authorities, and companies operating in the State of Kuwait shall furnish the Governor of the Central Bank with all the information and statistics he requires for his studies.

Second – Relations with Local Banks

Article 40

The Central Bank may:
a – Open deposit accounts for the banks and financial institutions operating in the State of Kuwait and for public credit institutions.
b – Open deposit accounts for other institutions, with the approval of the Minister of Finance. No interest shall be paid on the accounts referred to in this paragraph and the preceding paragraph except in the special cases decided by the Board of Directors of the Central Bank and approved by the Minister of Finance.
c – Open accounts in Kuwaiti Dinars with banks.
d – Participate with the banks in any deposit insurance scheme.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 41

The Central Bank may carry out with banks, and with no others, the following operations:
a – Sell, buy, discount or rediscount commercial paper, provided that it falls due within one year from the date of its acquisition, discount or rediscount by the Central Bank.
b – Grant, in emergency cases, loans or advances on current account for a period not exceeding six months against collateral it deems adequate.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 42

The Central Bank may not:
a – Extend the loans granted under paragraph (b) of the preceding Article for a period exceeding six months.
b – Accept for discount or as pledge any commercial paper signed by a member of the Board of Directors or by any officer or employee of the Bank.
* Clause (a) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Third – Operations in Gold and Foreign Currencies at Home and Abroad

Article 43

The Central Bank may:
a – Buy, sell, import and export gold and silver coins and bullion.
b – Carry out all foreign exchange operations and foreign transfers.
c – Maintain accounts with central banks, foreign banks, or international financial or monetary institutions.
d – Open accounts for central banks, foreign banks, or international financial or monetary institutions, and act as correspondent for such banks and institutions.
e – Grant advances or credits to central banks, banks, or international financial or monetary institutions, or obtain credits, advances or loans from them, provided that such operations fall within the scope of its functions as a central bank.
f – Buy, sell, discount and rediscount bonds, bills and certificates issued or guaranteed by foreign governments or by international financial or monetary institutions, provided that they are denominated in freely convertible currencies and are readily marketable in the financial markets.
g – Buy and sell foreign bonds and instruments other than those issued or guaranteed by foreign governments or by international financial or monetary institutions, provided that they are denominated in convertible foreign currencies and are readily marketable in the financial markets.
h – Buy and sell commercial paper accepted by foreign banks.
* Clauses (f), (g) and (h) replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 44

The Central Bank may:
1 – Invest the funds of the pension fund it establishes for the benefit of its officers and employees, and grant them loans in accordance with the rules laid down by the Board of Directors.
2 – Own the real property allocated for the conduct of the Bank’s business, to the exclusion of any other real property.
3 – Carry out generally all the operations customarily undertaken by central banks that are not incompatible with the exercise of its powers or the performance of its duties under this Law, and undertake the functions entrusted to it under any other law.

Fourth – Prohibited Operations

Article 45

The Central Bank may not:
1 – Engage in commercial business outside the scope of its functions as defined in this Law, or have a direct interest in any commercial, agricultural or industrial business or any undertaking, save as provided in Article (37).
2 – Buy or sell real property, save as provided in paragraph 2 of Article (44).
The Bank may, however, buy or acquire, by agreement or by way of compulsory sale, movable and immovable property in satisfaction of a debt due to it, provided that it sells such property within the shortest possible period unless it uses it for the conduct of its business.
3 – Buy shares or bonds of companies or public institutions otherwise than in the cases specified in Article (37).

Section Six – Accounts and Statements

Article 46

The financial year of the Central Bank is the financial year of the State.

Article 47

The bases for the valuation of the assets of the Central Bank shall be determined by Decree.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 48

The Central Bank shall record in a special account the profits it realises and the losses it incurs as a result of a change in the exchange rate of the Kuwaiti currency or of any foreign currency, or as a result of a change in the value of gold in relation to the Kuwaiti currency, as well as the profits arising from the withdrawal of banknotes or coins under the provisions of Articles (10) and (11) of this Law.
The credit balances of this account shall not be included in the profit and loss account of the Bank; the debit balances shall be made good by the Government unless the Board of Directors decides otherwise.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 49

The auditing of the accounts of the Central Bank shall be entrusted to one or more auditors selected by the Council of Ministers, which shall also fix their fees, upon the proposal of the Minister of Finance.

Article 50

The Governor of the Central Bank shall submit to the Minister of Finance:
a – A monthly statement of the assets and liabilities of the Bank, which shall be published in the Official Gazette.
b – An annual report on the business of the Bank, its balance sheet and its profit and loss account for the financial year ended, together with a general review of monetary, banking, financial and economic affairs.
This report shall be submitted within four months at most from the end of the financial year.
c – A report on the developments affecting the monetary or financial situation, their causes and consequences, and proposals for dealing with them.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Seven – General Provisions

Article 51

The Central Bank shall be exempt from all taxes, fees and financial charges of whatever kind, whether imposed for the benefit of the State treasury, the municipalities, or any public authority or institution.
The Bank shall also be exempt from paying court fees, deposits and sureties in advance; their settlement shall be deferred until the dispute has been decided.

Article 52

The debts owed to the Central Bank shall enjoy the same privilege over the property of its debtors as debts owed to the Government, and shall be collected by the same means prescribed for the collection of State funds.

Article 53

The Central Bank may be liquidated only by a law that lays down the procedures and timetable of the liquidation.

Part Three
Regulation of the Banking Profession

Section One – Establishment of Banks

Article 54

Banks are the institutions whose principal business, carried on in the ordinary course, is the acceptance of deposits for use in banking operations, such as the discount, purchase and sale of commercial paper, the granting of loans and advances, the issue and collection of cheques, the placing of public or private loans, dealing in foreign currencies and precious metals, and other credit operations, or whatever the Commercial Code provides or custom deems to be banking business. The branches of any bank operating in the State of Kuwait shall be deemed a single bank for the purposes of this Law, unless otherwise provided.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 55

The provisions of this Part shall not apply to:
a – Public credit institutions established by law.
b – Financial and investment institutions and companies, even if their articles of association permit them to accept deposits and carry out investment operations and certain banking business.
c – Real estate companies engaged in the subdivision of land or the construction and sale of buildings on deferred terms.
The Board of Directors of the Central Bank may, with the approval of the Minister of Finance, subject the institutions and companies referred to in this Article, or some of them, to all or some of the provisions of this Part, or to any special supervisory rules consistent with the nature of the activity of such institutions and companies, as laid down by the Board of Directors of the Central Bank.
The opinion of the Central Bank shall be taken on the memoranda and articles of association of financial and investment companies and on any amendments thereto, in order to verify the economic feasibility of establishing such companies.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 56

1 – Subject to the provisions of the Commercial Companies Law, insofar as they do not conflict with the provisions of this Law, the banking profession may be practised only by institutions taking the form of shareholding companies whose shares are offered for public subscription.
2 – The Council of Ministers may, by resolution, exempt from the provision of the preceding clause the banks established by the Government or in whose establishment it participates, as well as the branches of foreign banks licensed to operate in the State of Kuwait.
The Board of Directors of the Central Bank may, by resolution, license any foreign bank to open one or more branches in the State of Kuwait, in accordance with the rules and bases laid down by the Board of Directors in this respect.
The foreign bank shall designate the branch that is to be treated as its head office in the State of Kuwait.
The branches of a foreign bank in the State of Kuwait shall be treated as a single bank for the purposes of this Law.
The capital allocated to a branch of a foreign bank in the State of Kuwait shall be not less than fifteen million Kuwaiti Dinars. This amount may be increased by a resolution of the Board of Directors of the Central Bank, which may also exempt the branches of foreign banks operating in the State of Kuwait from the requirements of the supervisory ratios that limit the activities of banks by reference to the capital base, or from certain other supervisory ratios, in accordance with the controls it lays down in this respect.
The Board of Directors of the Central Bank shall lay down the bases, rules and controls of operation with which the branches of foreign banks in the State of Kuwait shall comply.
3 – Applications for the establishment of banks shall be submitted, before the commencement of the incorporation procedures, to the Board of Directors of the Central Bank to decide on the necessary recommendation.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977); clause (2) replaced by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004) and then by Law No. 3 of 2014 (Kuwait Al-Youm, Issue No. 1169, 2 February 2014).

Article 56 bis

The Board of Directors of the Central Bank may approve the opening of representative offices for foreign banks. Their tasks shall include studying the markets and advertising the services offered by the foreign bank they represent, provided that the activity of such offices is confined to representing those entities in the State of Kuwait in accordance with the controls laid down by the Board of Directors of the Central Bank, and they may not engage in banking or financial business.
* Added by Law No. 3 of 2014 (Kuwait Al-Youm, Issue No. 1169, 2 February 2014).

Article 57

1 – The capital of any bank shall be not less than seventy-five million dinars.
2 – Without the prior approval of the Central Bank, the holding of any one person, whether natural or juristic, in any Kuwaiti bank may not exceed five per cent of the capital of the bank, whether the holding is direct or indirect. Government entities and entities with attached or independent budgets are excepted from this.
If the holding of any one person exceeds this percentage for any reason, he shall dispose of the excess within the period fixed by the Central Bank.
In the event of contravention, the holder of the shares shall not benefit from the excess amount with respect to voting rights at the general assembly and in the management of the bank. The Board of Directors of the Central Bank shall lay down the bases and rules defining the concept of indirect holding.
The provisions of this clause shall not apply to situations existing before this Law came into force.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Article 58

If the capital of a bank falls below the minimum referred to in the preceding Article, the bank shall make good the deficiency within a period fixed by the Central Bank not exceeding one year from the date of notifying the bank whose capital has fallen.
The Central Bank alone shall have the right to assess the deficiency in capital.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Two – Registration of Banks

Article 59

Subject to the provisions of the Commercial Code and the Commercial Companies Law, insofar as they do not conflict with the provisions of this Law, no banking institution may commence business until it has been registered in the Register of Banks at the Central Bank.
No institution not registered in the Register of Banks may practise the banking profession, or use in its trade name, its publications or its advertisements the expression “bank”, “banker”, “bank owner” or any other expression whose use may mislead the public as to the nature of the institution.
Nor may any institution not registered in the Register of Banks or in the Register of Investment Companies at the Central Bank receive funds from third parties for investment.
The Central Bank may, whenever necessary and by all means it deems appropriate, verify that no person or entity is contravening the provisions of the two preceding paragraphs.
Without prejudice to any severer penalty provided for in any other law, whoever contravenes the provisions of the first, second and third paragraphs of this Article shall be liable to imprisonment for a period not exceeding two years and a fine not exceeding one hundred thousand dinars, or to either of these two penalties.
The licensing authority shall, at the request of the Central Bank, withdraw the licence of the entity that carried on the contravening activity and take such other measures as are necessary to prevent it from resuming that activity.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977); the third to sixth paragraphs replaced by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Article 60

The registration of banks, or the refusal of registration, shall be effected by a resolution of the Minister of Finance upon the recommendation of the Board of Directors of the Central Bank.
The Minister of Finance shall, upon the proposal of the Board of Directors of the Central Bank, issue regulations governing the Register of Banks, setting out the rules, procedures and time limits for registration, the amendment of registration, and its publication.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 61

1 – Registered banks shall notify the Central Bank of any amendment they intend to make to their memorandum or articles of association.
If the Central Bank approves the amendment in principle, the procedures required to complete it shall proceed in accordance with the provisions of the Commercial Companies Law.
Such amendments shall not take effect until they have been entered in the Register of Banks.
2 – As for other particulars subject to entry in the Register that do not involve an amendment of the memorandum or articles of association, the approval of the Governor of the Central Bank shall suffice for the amendment of the entries relating to them.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Three – Striking Banks off the Register and their Liquidation

Article 62

Subject to the provisions of the Commercial Companies Law, no bank may cease its operations or merge into another bank without the prior authorisation of the Minister of Finance, upon the recommendation of the Board of Directors of the Central Bank.
The Board of Directors of the Central Bank shall in such case verify that the bank has discharged all its obligations towards its customers and creditors, in accordance with the general rules it lays down in this respect.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 63

1 – A bank may be struck off the Register of Banks:
a – At its own request.
b – If it does not commence business within one year from the date on which it was notified of the decision to register it in the Register of Banks.
c – If it is declared bankrupt.
d – If it merges with another bank.
e – If it ceases to carry on its activity, or if its liquidity or solvency is endangered.
f – If it performs any act in contravention of the provisions of this Law.
2 – Striking off may not be proposed in respect of any bank in the two cases (e) and (f) above until the bank has been notified of the proposal and given an opportunity to submit its observations thereon.
3 – Striking off shall be effected by a resolution of the Minister of Finance upon the proposal of the Board of Directors of the Central Bank, and the resolution shall take effect from the date of its publication in the Official Gazette.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 64

Before proposing to strike off the Register of Banks any bank whose liquidity or solvency is endangered, the Board of Directors of the Central Bank may take all or some of the following measures:
a – Prohibit the bank from carrying out certain operations, or impose limits on the business carried on by the bank.
b – Appoint a temporary controller over the bank to monitor the progress of the bank’s activity.
c – Have the Central Bank assume the management of the bank for an appropriate period, after which it shall decide either that the bank is able to continue carrying on its activity by itself, or that the bank is to be struck off the Register of Banks and liquidated. The expenses of the management shall be borne by the bank under management.
In all cases, the Central Bank may, where it considers this necessary to protect the rights of depositors, request the competent court to issue an order prohibiting the taking of any proceedings against the bank concerned and staying all actions brought against it. Such an order shall remain in force for one year.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 65

Every bank in respect of which a resolution is issued striking it off the Register of Banks shall necessarily be liquidated.
The Board of Directors of the Central Bank shall lay down the rules and procedures for the liquidation of the operations outstanding at the time the striking-off resolution is issued.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Four – Prohibitions on Banks

Article 66

Banks may not:
a – Engage in trade or industry, or own goods, unless they have acquired them in settlement of a debt owed to them by third parties, provided that the bank sells such goods within one year from the date of acquisition.
b – Purchase real property other than that which they need for the conduct of their business or the housing of their staff, unless they have acquired it in settlement of a debt owed to them. In the latter case, the bank shall sell such real property within a period not exceeding three years, which may be extended by a resolution of the Board of Directors of the Central Bank.
c – Own or deal in their own shares, unless title to them has passed to the bank in satisfaction of a debt owed to it by third parties, provided that the bank sells such shares within two years from the date of acquisition.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 67

Banks may:
a – Purchase for their own account the shares of other commercial companies up to 50% of their own funds. This limit may not be exceeded without the prior approval of the Central Bank.
b – Own the shares and other securities held with them in settlement of a debt due to them, in which case the bank shall dispose of them within two years from the date of acquisition.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 68

A member of the board of directors of a bank, the chief executive officer of a bank, or his deputies or assistants, shall satisfy the following conditions, both on appointment and for continuing to hold any of these positions:
1 – He shall not have been previously convicted of a crime involving dishonour or breach of trust.
2 – He shall not have been declared bankrupt.
3 – He shall not have defaulted on payment, even once.
4 – He shall be of good reputation.
5 – He shall have adequate experience in banking, financial or economic affairs, in accordance with the rules and controls issued by resolution of the Board of Directors of the Central Bank of Kuwait.
6 – He shall not be a member of the board of directors or an employee of another bank operating in the State of Kuwait.
The chairmen of the boards of directors of banks shall notify the Central Bank of Kuwait of the names of the candidates for membership of the bank’s board of directors at least thirty days before the date fixed for the general assembly convened to elect the members of the board of directors, and shall likewise notify it of the names of the candidates for the positions referred to in the preceding paragraph.
The Board of Directors of the Central Bank of Kuwait may, within twenty-one days of being notified, object by a reasoned decision to any of these candidates on the ground that he does not satisfy the required conditions.
Such an objection shall result in the exclusion of the candidate from membership of the board of directors or from holding any of these positions, as the case may be. No candidate of whom the Central Bank of Kuwait has not been notified, or to whom it has objected in accordance with the provisions of this Article, may be presented to the general assembly of the bank. The Board of Directors of the Central Bank may request the board of directors of the bank concerned to remove any of the persons referred to in the first paragraph if, while holding his position, he ceases to satisfy any of the conditions laid down in this Article, or if the Board of Directors of the Central Bank considers that such action is necessary to safeguard the funds of depositors, the interests of shareholders or the general interest of the bank. If the removal is not effected, the Board of Directors of the Central Bank may issue a reasoned decision excluding any of them from his position, and this shall be noted in the Register of Banks.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977), then by Decree-Law No. 36 of 1992 (Kuwait Al-Youm, Issue No. 56, June 1992), then by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Article 69

Banks may not grant, in any form whatsoever, loans or advances on current account, or provide guarantees, to the members of their boards of directors, except with the prior authorisation of the general assembly.
Such loans, advances and guarantees shall be subject to the terms and rules applied by the bank to third parties.
The opening of documentary credits is not covered by this prohibition.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 70

No bank may issue “travellers’ cheques” without the prior authorisation of the Central Bank.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Five – Special Supervisory Provisions

Article 71

The Central Bank may furnish the banks with such instructions as it deems necessary to give effect to its credit or monetary policy or to secure the sound conduct of banking business.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 71 bis

The proportion of national labour in a bank shall be not less than fifty per cent of its total workforce, or such proportion as the Council of Ministers determines pursuant to Article (9) of Law No. 19 of 2000 on Supporting National Labour and Encouraging it to Work in Non-Governmental Entities, whichever is higher.
Branches of foreign banks shall satisfy this proportion within three years from the date of being licensed to operate in the State of Kuwait.
Kuwaiti banks, branches of foreign banks and the units referred to in the first paragraph that exist on the date this Law comes into force shall adjust their positions to conform with the provisions of this Article within three years from that date.
* Added by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004); the first paragraph replaced by Law No. 64 of 2007 (Kuwait Al-Youm, Issue No. 852, 6 January 2008).

Article 72

The Board of Directors of the Central Bank may, whenever necessary, lay down the rules and provisions with which all banks are bound to comply in order to safeguard their liquidity and solvency, and in particular the ratios to be maintained between the following items:
a – Between the bank’s own funds, on the one hand, and the amount of its liabilities towards third parties, on the other.
b – Between the bank’s liquid funds, on the one hand, and the total of its commitments on demand or at term, on the other.
c – Between the bank’s own funds, on the one hand, and the amount of its commitments by way of acceptances and guarantees, on the other.
The Central Bank shall define, in the instructions it issues and communicates to the banks, what is meant by the expressions “the bank’s own funds”, “liquid funds”, “commitments” and other such items.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 73

The Board of Directors of the Central Bank may, with the approval of the Minister of Finance:
1 – Fix for the banks the maximum value of discount operations, loans or other banking operations that they may carry out as from a specified date.
2 – Prescribe for the banks:
a – The minimum amount that customers are required to pay in cash to cover the opening of documentary credits.
b – The maximum amount that may be lent to any one person, whether natural or juristic, in relation to the bank’s own funds.
c – The portion of the bank’s funds that it is required to deposit in cash with the Central Bank.
d – The portion of the bank’s funds that is required to be invested in the local market.
e – The rate of interest payable on deposits and the maximum rates of interest and commissions chargeable to customers.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 74

The resolutions issued by the Central Bank in application of the provisions of the two preceding Articles shall have no retroactive effect, nor shall they prevent the performance of agreements concluded between the banks and their customers before the resolutions were issued.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 75

In the event of exceptional circumstances threatening the orderly conduct of business by the banks, the Governor of the Central Bank may, with the approval of the Minister of Finance, order the banks to close their doors temporarily and suspend their business. The banks shall resume their business by a decision issued by the Governor of the Central Bank and approved by the Minister of Finance.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Six – Specialised Banks

Article 76

Specialised banks are those banks whose principal business is the financing of specific economic sectors, such as the real estate, industrial or agricultural sectors, and whose core activities do not include the acceptance of demand deposits.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 77

Specialised banks shall be subject to the provisions on the regulation of the banking profession, insofar as those provisions are not inconsistent with the nature of the activity of specialised banks.
The Board of Directors of the Central Bank may lay down special rules for the supervision of each type of specialised bank.
Such rules shall deal in particular with the following:
a – The conditions for the acceptance of deposits.
b – The maximum value of the bonds they may issue, and the conditions of issue.
c – The conditions governing loans and other credit facilities granted by specialised banks.
d – The rules governing participation in the establishment of other companies or the purchase of their shares.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Seven – Inspection of Banks and Institutions Subject to the Supervision of the Central Bank

Article 78

a – The Central Bank shall, at any time, inspect the banks, the financial companies and institutions that have been made subject to the supervision of the Central Bank in accordance with the provisions of this Law, and the branches, companies and banks established abroad that are subsidiaries of Kuwaiti banks. Coordination in this respect shall be made with the central banks or banking supervisory authorities in the countries concerned.
The banking supervisory authorities of other countries may inspect the branches of their banks operating in the State of Kuwait, in coordination with the Central Bank of Kuwait before the inspection is carried out.
b – The officers of the Central Bank authorised to carry out inspections shall have the right to examine the accounts, books, records, documents and all papers they deem necessary for the purposes of the inspection, and to request any member of the board of directors or any officer of the bank or institution to furnish the data and give the information they consider necessary for the purposes of the inspection. The examination of the books, records and documents shall take place at the premises of the bank or institution under inspection.
c – The Central Bank shall draw up a comprehensive report on the results of each inspection it carries out on any bank or institution. The report shall include recommendations on the measures that the Central Bank considers useful for correcting the unsound conditions disclosed by the inspection. The Governor of the Central Bank shall send a copy of the report to the chairman of the board of directors or the manager of the bank or institution inspected. The Governor of the Central Bank may fix a period for the bank or institution to remedy the contraventions and correct the unsound conditions disclosed by the inspection.
The periodic dates of inspection and the other regulations governing it shall be determined by a resolution of the Board of Directors of the Central Bank.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977); clause (a) replaced by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Article 79

Any member of the board of directors, manager or officer of the bank or institution under inspection who refuses to furnish the information and data, or to produce the books, records and documents, requested by the inspector for the purposes of the inspection, or who furnishes information or data that he knows to be untrue, shall be liable to imprisonment for a period not exceeding three months and a fine of not less than one hundred dinars and not more than two hundred and twenty-five dinars, or to either of these two penalties, without prejudice to any severer penalty provided for in any other law.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 80

The officers of the Central Bank authorised to carry out inspections shall, both during their employment and after leaving it, preserve the confidentiality of the accounts, books and documents they have examined by virtue of their work, and shall not disclose any information relating to the affairs of the banks and institutions they have inspected or to the affairs of their customers, except in the cases where the law so permits.
Without prejudice to any severer penalty provided for in any other law, whoever contravenes the prohibition set out in the preceding paragraph shall be liable to imprisonment for a period not exceeding three months and a fine not exceeding two hundred and twenty-five dinars, or to either of these two penalties, together with dismissal from office.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Section Eight – Accounts and Statements

Article 81

Banks shall observe the following:
a – Their financial year shall end on the thirty-first of December of each year.
b – They shall submit to the Central Bank, within three months from the end of their financial year, the general balance sheet and the profit and loss account.
Branches of foreign banks whose opening is authorised under Article (56) of this Law shall keep separate accounts for the whole of their operations in Kuwait, comprising the balance sheet and the profit and loss accounts.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 82

1 – The Central Bank may request from the banks the data, statements and statistical information it deems necessary for the performance of its functions, and may establish a system for compiling bank credit statistics on a periodic basis.
2 – The Board of Directors of the Central Bank shall determine the nature of such data and information and the time limits allowed for submitting them.
3 – Banks shall furnish the Central Bank with all the data, information and statistics it requests, in accordance with the system it establishes for that purpose. All such information shall remain confidential, except for the publication of statistical information in aggregate form. Excepted from this are the data and information exchanged by the Central Bank of Kuwait with other central banks or banking supervisory authorities for the purposes of consolidated supervision of banks and of the branches and subsidiaries of those banks; such data and information shall be exchanged in accordance with the arrangements agreed between the Central Bank of Kuwait and the central banks or banking supervisory authorities concerned.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977); clause (3) replaced by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Article 83

The Central Bank may establish what is known as the risk centralisation system, in order to assist the banks in assessing the financial positions of persons applying to them for credit, to contribute to the Central Bank’s wish to keep continuously informed of trends in bank credit, and to assist in the application of the system for the discount and rediscount of commercial paper with the Central Bank.
The Board of Directors of the Central Bank shall lay down the rules and procedures, and shall specify the data, for the application of this system.
The data and information obtained from the risk centralisation system may not be disclosed except to the persons who are required to be notified of such data and information under the operating rules of the system.
Without prejudice to any severer penalty provided for in any other law, whoever contravenes this prohibition shall be liable to imprisonment for a period not exceeding three months and a fine not exceeding two hundred and twenty-five dinars, or to either of these two penalties, together with dismissal from office in all cases.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977).

Article 84

a – The auditor shall set out in his annual report the rules and methods on which he relied in verifying the existence of the assets, the methods of their valuation, and the manner of estimating outstanding commitments. He shall include in his annual report his opinion on the adequacy of the internal control systems applied in the bank, and on the adequacy of the provisions made to meet any deficiency in the values of the assets and to meet any liabilities falling on the bank, specifying the amount of any shortfall in the provisions.
b – The auditor shall state in his report whether the operations he has audited contravene any provision of the Law on the Central Bank and the Regulation of the Banking Profession or the regulations and resolutions issued in implementation thereof. He shall send a copy of this report to the Governor of the Central Bank.
c – The auditor shall, at the request of the Central Bank, review and audit any of the transactions carried out by the bank whose accounts he audits and submit a report thereon to the Central Bank. He shall sign any data or information sent by that bank to the Central Bank, attesting to the correctness of such information and data.
d – The auditor may not obtain loans, whether secured or unsecured, or guarantees from the bank whose accounts he audits.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977); clauses (a) and (c) replaced by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Section Nine – Sanctions

Article 85

1 – If a bank contravenes the provisions of this Law or the resolutions and instructions issued in implementation thereof, or the provisions of the bank’s articles of association, or fails to submit the documents, data and information it is required to submit to the Central Bank, or submits untrue data, the following sanctions may be imposed:
a) A warning.
b) The imposition of financial sanctions on the bank, graduated according to the gravity of the contravention, up to a maximum of fifty thousand Kuwaiti Dinars.
c) The temporary suspension of all or some of the operations that the Central Bank customarily carries out with banks.
d) Prohibiting the bank from carrying on certain business, or imposing any other restrictions on it in the exercise of its activity.
e) Requesting the removal or replacement of the officer responsible for the contravention, if he is one of the officers responsible for work in key sectors of the bank.
f) Deeming the member of the board of directors responsible for the contravention to have forfeited his eligibility for membership of the bank’s board of directors.
g) Appointing a temporary controller to monitor the conduct of business in the bank, whose powers and competences shall be determined by the Board of Directors of the Central Bank.
h) Dissolving the bank’s board of directors and appointing an administrator to manage the bank until a new board of directors is elected.
i) Striking off the Register.
2 – The sanctions provided for in clauses (a) and (c) shall be imposed by a decision of the Governor. The sanctions provided for in clauses (b), (d), (e), (f), (g) and (h) shall be imposed by a resolution of the Board of Directors of the Central Bank.
The sanction provided for in clause (i) shall be imposed by a resolution of the Minister of Finance after the approval of the Board of Directors of the Central Bank; all of the foregoing after considering the explanations of the bank concerned. Any funds obtained by the contravening bank as a result of the contraventions committed shall accrue to the Public Treasury, unless a right of a third party has attached to them; likewise, any financial benefits obtained by a member of the board of directors or an officer of the bank by reason of the contraventions committed shall accrue to the Public Treasury. The Board of Directors of the Central Bank shall lay down the rules and bases to be relied on in determining the amount of the funds accruing to the Public Treasury.
3 – Every member of the board of directors of the contravening bank, the chief executive officer, each of the general managers and their deputies and assistants, the sector managers and the branch managers shall, each within the limits of his competence, be responsible for every deliberate act committed by him that caused the bank to contravene the provisions of this Law or the resolutions and instructions issued in implementation thereof or the provisions of the bank’s articles of association, or caused the failure to submit the documents, data and information required to be submitted to the Central Bank, or the submission of untrue data. The person responsible for the contravention shall bear all the damage sustained by the bank, its shareholders or third parties as a consequence of the contravention.
* Replaced by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Article 85 bis

Every member of the board of directors of a bank and every manager, officer or employee of the bank shall not disclose any information, during his employment and after leaving it, relating to the affairs of the bank or its customers or to the affairs of other banks, that has come to his knowledge by reason of his duties, except in the cases where the law so permits.
Without prejudice to any severer penalty provided for in any other law, whoever contravenes the prohibition set out in the preceding paragraph shall be liable to imprisonment for a period not exceeding three months and a fine not exceeding two hundred and twenty-five dinars, or to either of these two penalties, and the offender shall in all cases be sentenced to dismissal.
* Added by Law No. 28 of 2004 (Kuwait Al-Youm, Issue No. 653, 15 February 2004).

Section Ten – Islamic Banks

Article 86

Islamic banks are the banks that carry on the business of the banking profession and whatever the Commercial Code provides or custom deems to be banking business, in accordance with the provisions of Islamic Sharia. They accept, in the ordinary course of business, deposits of all kinds, whether in the form of current accounts, savings or thrift accounts, or investment accounts for a term and for specified or unspecified purposes, and carry on financing operations of various maturities using the forms of Sharia-compliant contracts such as murabaha, musharaka and mudaraba.
They also provide banking and financial services of all kinds to their customers and those dealing with them, and carry on direct and financial investment operations, whether for their own account, for the account of third parties or in participation with third parties, including the establishment of companies or participation in existing companies or companies under formation that carry on the various fields of economic activity, in a manner not inconsistent with the provisions of Islamic Sharia and in accordance with the controls laid down by the Board of Directors of the Central Bank in this respect; all of this in accordance with the provisions set out in this Law.
The Central Bank shall lay down the bases, rules and controls governing the activity of the branches of foreign Islamic banks authorised to operate in the State of Kuwait. The branches of any foreign Islamic bank operating in the State of Kuwait shall be deemed a single bank for the purposes of this Law.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 87

By way of exception to the provisions of the Commercial Companies Law on the incorporation of companies and to the provisions of this Law concerning capital and the subscription percentages of founders in respect of Islamic banks, Kuwaiti banks registered in the Register of Banks may, with the approval of the Central Bank, establish subsidiary companies carrying on the activity carried on by Islamic banks in accordance with the provisions of Islamic Sharia and the provisions of this Law, provided that no single bank establishes more than one such company having only one office, that the capital of the company is not less than fifteen million Kuwaiti Dinars, that the founding bank subscribes for not less than 51% of the capital of the company and retains this percentage after incorporation and at all times, and that the remaining shares are offered for public subscription. If the subscribers do not take up all the shares offered, the founding bank shall be bound to cover the remaining part of the capital that has not been subscribed.
Save for the exception provided for in the preceding paragraph, the subsidiary company referred to in that paragraph that carries on its activity in accordance with the provisions of Islamic Sharia shall be deemed an independent Islamic bank for the purposes of applying the provisions of this Law.
The bank may not sell or assign the ownership of its subsidiary company, or any part thereof, to any other party.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 88

Applications for the establishment of Islamic banks shall be submitted to the Central Bank, before the commencement of the incorporation procedures, accompanied by the following documents:
1 – A statement of the names, nationalities and addresses of the founders and the share of each of them in the capital.
2 – The draft memorandum and articles of association.
3 – An economic feasibility study for the establishment of the bank.
4 – Any other documents requested by the Central Bank.
Applications for the establishment of branches of foreign Islamic banks shall be submitted to the Central Bank accompanied by the following documents:
1 – The memorandum and articles of association of the applicant bank.
2 – An economic feasibility study for the establishment of the branch.
3 – Evidence that the head office of the foreign Islamic bank is subject to the supervision of the supervisory authority of the country in which that head office is located, and of that authority’s approval of the establishment of the proposed branch.
4 – Any other documents requested by the Central Bank.
The applications shall be submitted to the Board of Directors of the Central Bank to decide whether to grant approval in principle or to refuse the application for the establishment of the bank or of the branch of a foreign Islamic bank.
The licence granted to branches of foreign Islamic banks may not be transferred to any other party.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 89

Islamic banks shall be registered in a special Register of Islamic Banks at the Central Bank, on an application submitted to the Central Bank on the prescribed form. Registration shall be effected by a resolution of the Minister of Finance upon the recommendation of the Board of Directors of the Central Bank. Such banks may not commence business until they have been registered in that Register.
Islamic banks may not establish branches at home or abroad without the prior approval of the Central Bank and the entry of those branches in the Register of Islamic Banks.
The Minister of Finance shall, upon the proposal of the Board of Directors of the Central Bank, issue regulations governing the Register of Islamic Banks, setting out the rules, procedures and time limits for registration, the amendment of registration, and its publication.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 90

Subject to the provisions of the Commercial Companies Law, insofar as they do not conflict with the provisions of this Law, the registration of Islamic banks in the Register is subject to the following conditions:
1 – The bank shall take the form of a shareholding company whose shares are offered for public subscription. The Council of Ministers may, by resolution, upon the proposal of the Board of Directors of the Central Bank and with the approval of the Minister of Finance, exempt the branches of foreign Islamic banks from this requirement when such banks are permitted to establish branches in the State of Kuwait.
2 – The Central Bank shall have approved the memorandum and articles of association of the bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 91

The registration of branches of foreign Islamic banks in the Register is subject to the submission to the Central Bank of the following:
a) An undertaking by the head office of the foreign bank that it is bound by any rights accruing to depositors and creditors and by all liabilities that may fall due on the branch.
b) Evidence of the transfer of the minimum capital allocated for commencing the activity of the branch in the State of Kuwait, as prescribed in this Law.
c) Any other undertakings, papers or documents requested by the Central Bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 92

Subject to the provisions of Article 87 of this Law and the provisions of the laws in force, the paid-up capital of any Islamic bank shall be not less than seventy-five million Kuwaiti Dinars.
The percentage subscribed by the founders in the capital of the bank shall be not less than 10% and not more than 20%.
For branches of foreign Islamic banks, the capital allocated to the branch shall be not less than fifteen million Kuwaiti Dinars. The percentages relating to the founders’ subscription may be amended, and the amount of the capital allocated to a branch increased, by a resolution of the Board of Directors of the Central Bank where necessary.
If the capital of the bank, or the capital allocated to the branch of a foreign Islamic bank, falls below the required minimum as a result of operating losses or for any other reason, the bank shall make good the deficiency within the period fixed by the Central Bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 93

An independent Sharia supervisory board shall be formed in every Islamic bank to supervise the business of the bank, composed of not less than three members appointed by the general assembly of the bank. The memorandum and articles of association of the bank shall provide for the existence of this board, the manner of its formation, its competence and the manner in which it carries out its work.
A board called the Higher Sharia Supervisory Board shall also be established at the Central Bank. The Board of Directors of the Central Bank of Kuwait shall lay down the bases and rules relating to the formation of the Higher Board, the manner of appointing its members, the organisation of its work, the determination of its competences and the remuneration of its members. The Higher Board shall give its Sharia opinion on the matters referred to it by the courts or arbitration centres concerning cases of Islamic banking and financial business.
In the event of a difference of opinion among the members of the Sharia supervisory board of an Islamic bank on a Sharia ruling, the board of directors of the bank may refer the difference to the Higher Sharia Supervisory Board at the Central Bank as the final authority in this respect.
The Sharia supervisory board shall submit an annual report to the general assembly of the bank setting out its opinion on the extent to which the business of the bank conforms to the provisions of Islamic Sharia, together with any observations it may have in this respect. This report shall be included in the annual report of the bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003); the second paragraph replaced by Law No. 3 of 2020 (Kuwait Al-Youm, Issue No. 1488, Supplement 4, 29 March 2020).

Article 94

The Central Bank may:
1 – Open accounts in Kuwaiti Dinars or in foreign currencies with Islamic banks.
2 – Open accounts with it in Kuwaiti Dinars or in foreign currencies for Islamic banks.
3 – Permit Islamic banks to participate in the clearing house.
These operations shall be carried out in accordance with such rules and arrangements as are not inconsistent with the provisions of Islamic Sharia and as decided by the Central Bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 95

The Central Bank may carry out the following operations:
1 – Provide Islamic banks, in cases of necessity, with financing for a period not exceeding six months, using instruments and methods not inconsistent with the provisions of Islamic Sharia and in accordance with the terms and rules decided by the Board of Directors of the Central Bank.
The term of the financing may be extended for a further period not exceeding six months.
2 – Buy from and sell to Islamic banks securities and other instruments that conform to the provisions of Islamic Sharia.
3 – Issue instruments that conform to the provisions of Islamic Sharia, within the limits and on the conditions decided by the Board of Directors of the Central Bank.
Such instruments shall be bought from and sold to Islamic banks and other entities subject to the supervision of the Central Bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 96

Islamic banks shall return demand deposits in full to their owners on demand, and such deposits shall not bear any losses.
The owners of investment deposits shall share in the profits or losses arising from the activity in proportion to the funds they have contributed to the investment, in accordance with the contracts concluded with them and the provisions set out in this Law.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 97

The Board of Directors of the Central Bank shall lay down the rules and provisions to be followed in supervising Islamic banks with regard to their liquidity, solvency and orderly operation, and in particular:
a) A liquidity system and the determination of its components.
b) Standards for capital adequacy, by determining the ratio of capital to the components of assets.
c) Rules for calculating the provisions required to meet asset risks.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 98

The Board of Directors of the Central Bank may prescribe for Islamic banks all or some of the following:
1 – The maximum value of operations relating to a particular activity.
2 – The maximum participation of the bank in the companies it establishes, participates in establishing, or holds shares in, and the rules and conditions to be observed in this respect, as well as the maximum participation of the bank in any one project.
3 – The maximum amount of the obligations of any one customer towards the bank, with due regard to granting a relative advantage to the bank’s subsidiaries in accordance with the controls laid down by the Central Bank.
4 – The volume of funds that is required to be invested in the local market.
5 – The portion of deposited funds that the bank is required to deposit in cash with the Central Bank.
6 – The rules and conditions to be followed in the relationship between the bank and its customers, and between its customers and its shareholders.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 99

Subject to the provisions of Articles 97 and 98 of this Law, Islamic banks may not own or deal in plots or buildings of private housing within the State of Kuwait, with the exception of:
1 – What they own or deal in for the purpose of carrying out operations that are being or will be financed, which have been or are agreed with customers in accordance with the methods and forms of financing that conform to the provisions of Islamic Sharia.
2 – What they need for the conduct of their business or for the housing or recreation of their staff.
3 – What devolves to them by reason of the failure of third parties to discharge their obligations towards them, provided that they sell it within three years from the date of devolution, which period may be extended by one year where necessary with the approval of the Central Bank.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 100

In matters for which no special provision is made in this Section, Islamic banks shall be subject to the provisions of this Law insofar as they are not inconsistent with the provisions of Islamic Sharia.
* Added by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Part Four
General and Transitional Provisions

Article 101

a – As from the date on which the provisions of Parts One and Two of this Law come into force, the banknotes and coins issued by the Kuwait Currency Board shall be deemed liabilities of the Central Bank, and such banknotes and coins shall, for all purposes, be deemed banknotes and coins issued by the Central Bank.
b – The Central Bank shall take over from the Kuwait Currency Board all stocks of banknotes and coins not yet put into circulation.
c – The Central Bank may put into circulation the banknotes and coins of the Kuwait Currency Board as if they were the Bank’s own banknotes and coins.
* Originally Article 77; renumbered by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 102

a – As from the date on which Parts One and Two of this Law come into force, the Kuwait Currency Board shall transfer to the Central Bank assets in gold and foreign currencies equal in value to the monetary liabilities taken over by the Bank. If the assets of the Kuwait Currency Board are insufficient for that purpose, the Government shall make good the deficit.
b – If a surplus remains with the Kuwait Currency Board after the settlement of all outstanding liabilities, that surplus shall be transferred to the general reserve fund provided for in Article (17) of this Law.
c – The assets in gold and foreign currencies transferred under this Article shall be valued in the manner prescribed in Article (47) of this Law.
* Originally Article 78; renumbered by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 103

By way of exception to the provisions of Article (46) of this Law, the first financial year of the Central Bank shall begin on the date on which the provisions of Parts One and Two of this Law come into force and shall end at the end of the financial year. If that period is less than six months, the annual reports that the Governor is required to submit under the provisions of Article (50) shall be submitted at the end of the following financial year.
* Originally Article 79; renumbered by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 104

Amiri Decree No. 41 of 1960 promulgating the Kuwaiti Currency Law and the decrees amending it are repealed as from the date on which the provisions of Parts One and Two of this Law come into force. The Kuwait Currency Board shall then be liquidated after it has submitted its statements of account and its report on the last accounting period and discharged all its outstanding obligations.
* Originally Article 80; renumbered by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 105

The Minister of Finance shall issue the resolutions necessary for the implementation of this Law.
* Originally Article 81; renumbered by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Article 106

The Ministers, each within his competence, shall implement this Law. It shall be published in the Official Gazette, and an Amiri Decree shall be issued fixing the date on which it comes into force, in whole or in part.
* Originally Article 82; renumbered by Decree-Law No. 130 of 1977 (Kuwait Al-Youm, Issue No. 1164, 25 October 1977) and then by Law No. 30 of 2003 (Kuwait Al-Youm, Issue No. 618, 1 June 2003).

Issued on 30 June 1968 and published in the Official Gazette Kuwait Al-Youm on 7 July 1968.