Title: Circular No. (11) of 2021 Regarding the Establishment of Interest Rates Ceiling for Margin Trading Service
Within the framework of implementing the provisions of Law No. (07) of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Executive Bylaws and their amendments, and in completion of Resolution No. (53) of 2021 issued on 22/04/2021 regarding Amending Some Provisions of Module One (Glossary) and Module Eleven (Dealing in Securities) of the Executive Bylaws of Law No. 7 of 2010. The Capital Markets Authority (CMA) draws the attention of all licensed persons who wish to offer the margin trading service to the issuance of the Central Bank of Kuwait Board of Directors Decision No. (87/455/2021) on amending Resolution No. (29/338/2008) Concerning the Establishment of Contractual Interest Rate Ceiling, Article (1) of which states the following:
Article (2) of the Central Bank of Kuwait Board of Directors Decision No. (29/338/2008) Concerning The Establishment of Contractual Interest Rate Ceiling is hereby amended as follows:
While observing the rules of article one, the annual contractual interest rate ceiling for all forms of commercial lending and other forms of lending denominated in KD, shall not exceed 2.5% (two and a half percent) over the discount rate determined and announced by the Central Bank of Kuwait Board of Directors for all forms of lending transactions denominated in KD and which tenor does not exceed one year. While the annual interest rate ceiling on KD shall not exceed 4% (four percent) for all forms of lending transactions denominated in KD and which tenor exceeds one year. The lender may collect in advance a commitment interest at a rate not exceeding 0.5% (half one percent) p.a. on the entire amount of the credit facilities limits accorded to the debtor in the form of overdraft.
As for the lending transactions in KD related to the financing of the margin trading service, the maximum annual interest rate on the financing provided for this type of activity shall be no more than 4.0% (four percent) above the discount rate, whether the financing is for a period of less than or more than one year.
Accordingly, CMA draws the attention of all licensed persons who wish to offer the margin trading service on the necessity of adhering to the provision of the Central Bank’s decision when providing the margin trading service. The CMA would also like to confirm the provision of Circular No. (08) of 2021 Regarding the Registration at Ci-Net - Credit Information Network issued on 20/05/2021, and the importance of registering at Ci-Net - Credit Information Network so that the licensed persons can review the solvency and evaluate the credit status of each client before offering the margin trading service in accordance with its regulating policies and procedures.
In conclusion, the Capital Markets Authority extends its sincere thanks and gratitude to the Board of Directors of the Central Bank of Kuwait and its employees for their efforts to enhance supervision of the financial system and develop the investment environment in the State of Kuwait.
Othman I. Alissa
Acting Managing Director
Issued on: 15/07/2021