KUWAIT CITY, Jan 12: Retiree loans have reemerged in the banking sector, but this time not to offer additional benefits, such as better deposit rates or special purchase discounts. Instead, the focus is on the protective measures necessary for future loans to retirees. There are ongoing banking discussions about setting new conditions for lending to this group. If these conditions are not met, banks will be expected not to lend to retirees, as failing to do so would violate the expected "gentleman’s agreement" in banking and the regulatory guidelines.

In this context, informed sources have revealed to a local daily newspaper that bank loan officials are considering developing new procedures to regulate the process of transferring retirees’ salaries from one bank to another. This is part of a broader set of solutions that will ensure the bank’s ability to recover its loans if the customer transfers their account to a non-creditor bank before repaying their debt. Furthermore, the new measures would grant banks the right to disclose the customer’s credit status, which is currently not available.

Among the banking requirements under consideration for granting loans to retired customers is the need for a pledge letter from the General Organization for Social Insurance. This letter would confirm that the retiree’s salary cannot be transferred to another bank without the bank’s approval. Additionally, banks would need to verify the retiree’s credit status through the Credit Information Network System (CyNet) before granting loans.

The sources also suggested that the Central Bank of Kuwait may issue a circular that would require retired customers to settle any outstanding obligations before transferring their salary to another bank. Alternatively, banks would not be permitted to grant loans to retirees unless it is confirmed that they have no financial obligations to other banks. This move would ensure that banking decisions are based on clear, accurate information, allowing for sound credit decisions.

To understand the challenges bank officials face with the current lending mechanisms for retirees, it is important to recognize that retirees currently have the right to transfer their salary account to another bank, according to regulatory instructions. This freedom to transfer accounts raises concerns, as it allows retirees to move between banks without restrictions, unlike other customers who are required to remain with the lending bank. This flexibility creates the potential for irregular payment patterns, which heightens the risk for banks.

Although retirees are bound by maximum financing limits, such as those on loan amounts and monthly installments—limits governed by credit data registered on CyNet—their credit status is not included in the CyNet system, as it is for other customers. This lack of transparency weakens the ability of banks to assess retirees’ credit history and determine whether they are regular or irregular in payments.

Despite these challenges, retirees remain preferred customers for many banks. However, the freedom to transfer accounts from one bank to another raises concerns about banks’ ability to guarantee repayment if retirees default. The proposed banking requirements aim to alleviate these concerns by reducing the risk of irregular payment behavior among retirees. These measures are intended to protect the banks' loan portfolios and do not reflect a stance against lending to retirees.

The sources further emphasized the importance of requiring retirees to submit a certificate of clearance in order to change the authority that disburses their pension. There is no legal document in the Social Insurance Law that opposes this request, making it procedurally sound. Additionally, it would help regulate the flow of loans in this sector, ensuring that both banks' rights and the financial stability of retirees are maintained. This is especially crucial with the recent rise in the number of young retirees, some of whom retire in their late thirties. This trend means they could have an extended retirement period, making it important to safeguard their financial stability while protecting the banks' interests.