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Establishment of Warba Bank an unprecedented govt initiative

By Ahmad Faraj KUWAIT, Sept 15 (KUNA) -- The Cabinet's approval of a draft decree establishing Warba Bank, with a capital of KD 100 million of which a 76-percent-stake will be held by citizens and subscribed to on their behalf by the government, is considered a unique financial initiative at the regional and international levels.
The uniqueness of this initiative stems from several reasons, the first being that it sets a new precedent; no government has established a bank and allocated the majority stake to citizens with nothing in return, as a type of long-term investment and to create some form of stability for the coming generations.
Furthermore, this is the first bank in which all Kuwaitis, with no exceptions, will be holding shares, making Warba Bank the first shareholding company in the world to represent 100 percent of the people at establishment.
Late last night, the Cabinet approved a draft decree to establish the shareholding Islamic Sharia-compliant bank with a KD 100 million capital, with 24 percent of its stocks held by Kuwait Investment Authority (KIA), and the remaining 76 percent granted as bonus shares to all Kuwaitis alive on the day that the decree is published in the official gazette.
The bank's shareholders will exceed one million, as the Kuwaiti population stood at 1.087 million in 2008, thus making it the bank with the largest number of shareholders in Kuwait, and one of the greatest in the Arab region.
The Kuwaiti banking sector groups six conventional groups (one of which is in transition towards becoming Sharia-compliant) and three Islamic banks, as well as a group of foreign banks operating here after obtaining licensing from the Central Bank of Kuwait (CBK).
Kuwait's Islamic banking market is one of the fastest-growing and most influential in the region. Kuwait Finance House is one of the oldest Islamic banks in the world, while the Sharia-compliant Boubyan Bank was established in 2004. Kuwait Real Estate Bank transformed into an Islamic bank and came to be known as Kuwait International Bank, while the Bank of Kuwait and the Middle East is in the transition towards becoming a full-fledged Islamic bank.
Some 873,000 Kuwaitis subscribed to shares of Boubyan Bank at establishment in 2004, at 80 percent of the Kuwaiti population. The bank had a capital of KD 100 million, with KIA holding 20 percent, the Public Institute for Social Security (PIFSS) holding four percent, and the rest open to public subscription.
Despite lack of details pertaining to the next step, the nature of the establishment of Warba Bank makes it different from any other shareholding company, as the government will be subscribing on behalf of the citizens, as a form of grant.
The basic steps for the establishment of the bank will apply nonetheless; a constituent committee will be set up to monitor subscription, following which a constituent assembly will be held to elect a board of directors. Only then can the bank operate, in line with the regulations of the CBK, the Ministry of Commerce and Industry, and Kuwait Stock Exchange when it is listed at a later stage. (end) amf.ema KUNA 151220 Sep 09NNNN