Regulatory Alerts2003-11-03
Classification Policy for Investment and Finance Transactions with Customers
The Central Bank of Kuwait mandates Islamic banks to classify customer investment and finance transactions into regular or irregular categories based on payment defaults, equity declines, and specific customer financial conditions. Irregular transactions are assigned to Monitor, Sub-standard, Doubtful, or Bad tiers according to default duration or risk indicators, triggering specific provision rates ranging from management discretion up to 100 percent. Banks must establish internal committees to evaluate customer portfolios, compute both specific and general provisions (set at a minimum of two percent), and apply the Bank of England Matrix for sovereign risk assessments.
Share