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𝑱𝒖𝒓𝒊𝒔𝒅𝒊𝒄𝒕𝒊𝒐𝒏: Kuwait

𝑰𝒔𝒔𝒖𝒊𝒏𝒈 𝑨𝒖𝒕𝒉𝒐𝒓𝒊𝒕𝒚: Central Bank of Kuwait (CBK)

𝑹𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆: CBK Circular No. 2/105

𝑺𝒖𝒎𝒎𝒂𝒓𝒚:

The Central Bank of Kuwait has directed local banks, investment companies and finance companies not to rely on plots of land or structures established on state-owned property as collateral for credit facilities or financing operations.

Such properties must also not be included among the collateral counted for purposes of meeting applicable regulatory requirements in periodic reports.

The Circular further requires financial institutions currently holding such collateral to reassess the relevant credit facilities and consider requesting additional acceptable guarantees where necessary.

𝑲𝒆𝒚 𝑪𝒐𝒎𝒑𝒍𝒊𝒂𝒏𝒄𝒆 𝑹𝒆𝒒𝒖𝒊𝒓𝒆𝒎𝒆𝒏𝒕𝒔:

1.State-Owned Land and Structures Not to Be Treated as Qualifying Collateral:

Banks, investment companies and finance companies should not rely on state-owned land or structures built on state-owned property as collateral for credit facilities or financing operations.

The restriction is particularly relevant to buildings and structures constructed by persons or companies permitted to use or lease state-owned land.

2. Review of Existing Facilities:

Financial institutions currently holding such collateral should conduct a review of the relevant credit facilities and assess whether additional acceptable guarantees are required.

The review should consider the enforceability, liquidity and adequacy of the remaining collateral supporting the facility.

3. Regulatory Reporting:

State-owned land and structures covered by the Circular should not be included among collateral counted for purposes of satisfying applicable regulatory requirements in periodic reports.

Financial institutions should therefore review their existing regulatory reporting and collateral calculations where such assets have previously been included.

4. Impact on PPP and Project Finance:

The Circular confirms the existing position applicable to Kuwait PPP projects, where the project company cannot sell or mortgage the land on which the project is established.

For other projects involving state-owned land, including certain industrial, commercial and BOT-style developments, financial institutions should review existing security arrangements where buildings or structures on state-owned land have been treated as collateral.

5. Alternative Security – Commercial Premises Pledge:

The Circular does not prevent the use of a commercial premises pledge over the privately owned movable and intangible assets of a commercial establishment.

Accordingly, project lenders may continue to consider a commercial premises pledge over privately owned movable and intangible assets of the commercial establishment, subject to the applicable legal and registration requirements.

𝑹𝒆𝒄𝒐𝒎𝒎𝒆𝒏𝒅𝒆𝒅 𝑨𝒄𝒕𝒊𝒐𝒏𝒔:

Financial institutions should:

• Review existing portfolios to identify facilities where state-owned land or structures have been treated as qualifying collateral. 
• Reassess affected facilities and determine whether additional acceptable guarantees are required. 
• Review regulatory reporting to ensure that such assets are not included in collateral calculations where prohibited. 
• Review project finance security packages, particularly for projects involving state-owned land. 
• Ensure proper documentation and registration of alternative security arrangements, including commercial premises pledges where applicable. 

𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝑫𝒂𝒕𝒆:

The Circular was issued on 9 August 2026 and applies to local banks, investment companies and finance companies. Financial institutions should review existing arrangements and take the necessary measures to comply with the CBK’s requirements.

If you have any questions or require further information regarding the CBK Circular and its implications, please contact us at info@arazzaqlaw.com