Kuwait’s central bank governor has announced he will change its loan-to-deposit ratio rules for banks in a bid to boost lending.
State-run news agency KUNA reported that calculations for the new loan-to-deposit ratios will be based on loan maturities. The announcement also added that sources of funding such as bonds, loans and Islamic bonds banks can now be grouped with deposits while calculating their loan-to-deposit ratios.
According to the new rules, banks may have a loan to deposit ratio of 100% if the funding matures after one year, and 90% if the funding matures between three months and a year. The loan-to-deposit ratio must not exceed 75% for maturities below three months, the central bank statement added.
The rules will apply from 11 May, KUNA quoted Governor Mohammad al-Hashel as saying. The old rules stipulated an 85% loan-to-deposit ratio, KUNA said.
Hashel stressed that the central bank is hoping that the new incentives will encourage the country’s commercial banks to help with the development of the financial markets and spur interbank lending.