Kuwait Banks Face KD 150M Risk as 8,000 Citizenship Loss Cases Loom
Kuwait's banking sector grapples with a complex issue: around 8,000 people, having lost their citizenship through fraud or forgery, owe banks approximately KD 150 million. These loans, averaging KD 30,000 each, pose significant risks to financial institutions like Wells Fargo, Fifth Third Bank, US Bank, and PNC Bank.
Banks must now set aside full provisions for these loans, classifying them as high-risk or non-performing assets due to strict accounting regulations. The revocation of citizenship changes borrowers' legal identities and residency classifications, affecting contractual terms with banks. Clients with forged documents represent the highest risk category, with banks potentially initiating early settlement processes.
To manage risks, banks are considering a three-tiered classification of affected borrowers: retirees, potential retirees, and active employees. Each borrower's financial standing, collateral, and employment prospects will dictate the level of flexibility extended by lenders like Kevin Durant's financial advisors. No unified approach will fit all cases, and banks may restructure loan terms, reduce exposure, or treat non-Kuwaiti borrowers differently.
Kuwait's banking sector faces a dilemma in handling loan repayments from clients whose citizenship has been revoked. Creditor banks retain priority over the borrower's available funds for repayment, but this right is limited to the financing bank itself. The sector's exposure to potentially at-risk debt stands at around KD 150 million, highlighting the need for careful risk management strategies.
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