The Central Bank of Kuwait’s recent steps in an effort to reduce the money supply and eventually lower inflation will have severe consequenses on the local banking sector. To recap the following steps were taken by the CBK:
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Consumer loans cap will be 40% of salary, from 50%
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Pensioners loans’ cap to 30% of income
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A new limit on interest rates of 3% over discount rate, from 4%
The banking sector in general relies heavily on lending funds to consumers at high rates at long term intervals. The loan cap on potential customers will decrease the amounts banks can lend and along with the limits on the interest rate charged will lower returns on the already decreased amounts taken. This step in itself will lower the revenues’ for the banking sector which will be evident in the 2009 statements. My prediction is that, based on the new regulations, banks’ revenues will be between 20 -25% lower than last year. Continue reading ‘Future of Kuwait’s banking sector’
