KUWAIT CITY, Dec 17: The decision announced by the First Deputy Prime Minister, Minister of Defense, Minister of Interior, and Chairman of the Supreme Committee for the Investigation of Kuwaiti Nationality, Sheikh Fahad Al-Yousef, to allow retired, divorced, and widowed wives of Kuwaitis residing in Kuwait to retain their jobs and continue receiving salaries under Article 8 of the Nationality Law has had a widely positive impact. This decision reaffirms Kuwait’s reputation as a country of humanity. However, banks have adopted their own interpretation of the decision, leading to results contrary to the expectations of those affected.

Following the announcement, a key question emerged: Do individuals allowed to retain their jobs have the right to resume withdrawing salaries as per previous practice, or will the decision only add to their frozen account balances until their status is resolved?

Responsible banking sources explained that banks are maintaining the freeze on accounts as per the Cabinet’s directive, which mandates halting all financial transactions for individuals whose nationalities have been withdrawn. This includes those permitted to keep their jobs and receive salaries. The decision does not exempt these individuals from the account freeze or allow them to access their funds without government approval, even to cash their salaries.

To clarify, the sources stated that banks will not permit individuals to withdraw their salaries until they resolve their residency status. However, banks will allow funds, including salaries, to flow into these accounts. The freeze on accounts will only be lifted in two cases:

The sources further elaborated that withdrawals from frozen balances will only occur in two specific scenarios. First, obligations to government entities, such as deductions for General Organization for Social Insurance installments, housing payments, educational fees, or traffic fines, will be prioritized as government debts take precedence over other liabilities. Second, loan installments due to creditor banks can be deducted directly from the frozen balance, provided the customer’s account is with the same bank. If the funds are held in a non-creditor bank, no transfers will be permitted to other creditor banks.

This means that a portion of the salaries of retired, divorced, and widowed wives of Kuwaitis—under Article 8 of the Nationality Law—will be used to settle government and bank obligations, while any surplus will remain frozen in their accounts until further notice.

Another critical question arises regarding the treatment of deposits, whether existing or expired, for individuals whose nationalities have been withdrawn. Will these deposits be renewed to new terms and accrue interest based on market rates, or will they remain static assets without movement or profitability?

Sources anticipate that banks will maintain these deposits without renewing their terms until the individuals resolve their status. This means the balances will not generate any interest, even if held for years. Since individuals whose nationalities have been withdrawn are prohibited from accessing their funds, banks are similarly restricted from investing these deposits, turning them into idle liquidity with no returns for either party.

In a related development, sources estimate that the value of consumer and personal loans owed to banks by individuals whose nationalities were revoked could double. Recent data indicates that the number of affected individuals has surpassed 12,100, with outstanding loans estimated at approximately 35 million Kuwaiti dinars. These loans are distributed across banks based on their market share of individual loan portfolios. Notably, these figures do not include loans directed to companies whose nationalities were revoked.

The most significant impact on banks comes from loans taken by individuals whose nationalities were revoked due to forgery, as many had obtained consumer and installment loans up to the Central Bank of Kuwait’s maximum limit of 95,000 dinars.

Sources revealed that banks are likely to allocate precautionary provisions for these loans in their financial statements for the fourth quarter of 2024. This would mark the first time in Kuwaiti banking history that such provisions are recorded. Specific provisions will be set aside for doubtful loans at a rate of 100% for customers whose salaries have been suspended and whose account balances cannot cover their obligations. Legal action will be taken against these customers, classifying them as defaulters. Additionally, general provisions may be created to prepare for any future increase in the number of affected individuals and loan defaults.

On another note, individuals whose nationalities have been withdrawn continue to use telephone and internet lines registered in their names under monthly billing systems. However, sources indicated that telecommunications companies will not renew expired contracts for these customers. Existing bills under current contracts must be paid in cash, as direct deductions from bank accounts have been suspended for some customers.

This measure is supported by the requirement for a valid residency permit to renew contracts, which affected individuals cannot provide until their residency status is resolved.