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The future looks bright according to Kuwait Central BankMENA

The future looks bright according to Kuwait Central Bank

Shareholders of Kuwaiti banks woke up to good news over the weekend as the Central Bank of Kuwait gave lenders the thumbs-up to distribute cash earnings in the form of dividends. The decision came in light of new “financial data of Kuwait banks that showed strong and solid capital adequacy levels” according to the central bank.

The surprising announcement goes against a statement made by the Kuwait Banking Association last June mandating banks to forego any distribution of profits from 2020.

Last summer’s mandate was in response to the global financial crisis brought on by COVID-19 and historically low oil prices. It was an attempt by the Kuwait Banking Association to ensure liquidity for people and businesses in financial need and increase capital reserves by requiring the country’s banks to keep more cash on their books.

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why it matters
Saturday's announcement is an indication of the Central Bank of Kuwait's faith and confidence in the country's financial system. As the original rule against distributing dividends was to be in effect “until current extraordinary circumstances created by the coronavirus pandemic cease to exist”, does this mean Kuwait's central bank believes the economic threat of the pandemic is behind us?