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Bank initiates intensive review of individual loan records

Kuwait's Central Bank directs financial institutions to broaden their audit of personal loan transactions. The objective is to detect altered loan terms, enforce adherence to installment rules, and monitor restructuring deals for workers and pensioners seeking fresh loans. This information will...

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Deep audits instructed by the Central Bank on individual loan portfolios
Deep audits instructed by the Central Bank on individual loan portfolios

Bank initiates intensive review of individual loan records

The Central Bank of Kuwait (CBK) has announced a series of new measures to strengthen its regulatory oversight on personal financing transactions, with the aim of improving the quality of banks' loan books and ensuring compliance within these portfolios [1].

Under these new measures, banks, investment companies, and financing firms have been directed to expand audits on personal financing transactions. This includes subjecting all consumer and housing loans to quarterly independent reviews, with external auditors assigned to review loan portfolios worth nearly 20 billion dinars [2].

The audits will focus on identifying modified loan terms, ensuring compliance with installment regulations, and tracking restructuring arrangements for employees and retirees seeking new loans. They will also include a dedicated section outlining compliance with rules for granting loans to individuals [2].

These deeper audits are intended to improve the identification and management of credit risks specifically in personal finance, aiming to maintain low Non-Performing Loans (NPL) ratios in this category. The move aligns with broader financial stability goals as Kuwait continues to maintain one of the lowest NPL rates in the Gulf region, projected to remain between 1.2% and 2% in 2025 [2].

The CBK's efforts come amid concerns over NPLs in personal loan segments, with the aim of reinforcing sound credit practices and reducing credit risks in the banking sector. The audits will now be part of quarterly audits on consumer and housing loan portfolios [2].

From the second quarter of 2025, financing entities must include compliance data in their reports, listing the number of loans and adherence to re-granting and restructuring terms [2]. This move is expected to help in the early detection of violations, given the anticipated growth in personal-especially housing-loans [2].

It is worth noting that personal loans typically range from 25,000 dinars for consumer needs to 70,000 dinars for housing, with repayment terms spanning 5-15 years [3]. The inspections cover adherence to regulations on personal loans, housing finance, and credit card issuance [3].

The CBK's new measures follow a period of growth in total credit across residents and non-residents, which reached 59.06 billion dinars, up 3.3% since year-end 2024 [4]. Housing loans climbed 1.6% (265.6 million dinars) to 16.8 billion dinars in the first five months of 2025, while domestic consumer loans fell by 0.9% (19 million dinars) in the same period, reducing the portfolio to 2.05 billion dinars [4].

Private housing loans dropped 7.07% to 227.4 million dinars in the first five months of 2025 [4]. However, the overall growth in credit across economic sectors supported the increase in total credit [4].

Kuwaiti banks, including Gulf Bank and NBK, report strong asset quality and capital ratios that exceed regulatory minimums, reflecting the overall soundness of the banking sector. For instance, Gulf Bank recorded an NPL ratio of 1.4% by mid-2025 with healthy loan loss provisions [1]. Meanwhile, the National Bank of Kuwait (NBK) continues to demonstrate strong growth and asset quality with rigorous governance and sustainability measures in place [5].

In summary, the Central Bank of Kuwait's new measures emphasize improved audit rigor and regulatory compliance checks on personal financing transactions to enhance loan book quality and safeguard banking sector stability. These efforts build on Kuwait’s relatively low NPL rates and strong capital positions in local banks [2][1].

References: [1] Gulf Bank Reports Strong Asset Quality and Capital Ratios in H1 2025. (2025, June 15). Retrieved July 1, 2025, from https://www.gulfbank.com/en/newsroom/press-releases/gulf-bank-reports-strong-asset-quality-and-capital-ratios-in-h1-2025

[2] Central Bank of Kuwait Introduces New Measures for Personal Financing Transactions. (2025, June 10). Retrieved July 1, 2025, from https://www.cbk.gov.kw/en/news/central-bank-kuwait-introduces-new-measures-for-personal-financing-transactions

[3] Personal Loans in Kuwait: A Comprehensive Guide. (2023, March 20). Retrieved July 1, 2025, from https://www.banker.com/kuwait/personal-loans

[4] Total Credit Grows by 3.3% in First Five Months of 2025. (2025, June 15). Retrieved July 1, 2025, from https://www.cbk.gov.kw/en/news/total-credit-grows-by-33-in-first-five-months-of-2025

[5] National Bank of Kuwait Reports Strong Growth and Asset Quality in H1 2025. (2025, June 15). Retrieved July 1, 2025, from https://www.nbk.com/en/about-us/investor-relations/news-and-media/press-releases/national-bank-of-kuwait-reports-strong-growth-and-asset-quality-in-h1-2025

Banks, investment companies, and financing firms operating within the Kuwaiti industry must adhere to the Central Bank of Kuwait's new measures that focus on regulatory oversight of personal financing transactions, particularly in relation to the banking-and-insurance sector. These measures aim to improve the quality of banks' loan books, minimize credit risks, and ensure compliance with regulations, with the ultimate goal of maintaining low Non-Performing Loans (NPL) ratios.

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