Capital Adequacy is a key indicator for banks and licensed companies. Supervisory authorities tend to enhance this indicator stressing the fact that the capital adequacy of the said business entities should be matching the activities they perform and the risks they take. This has big influence on the stability of the financial market.
In this context, the Capital Markets Authority “CMA” issued Resolution No. 170 of 2019 regarding the implementation of capital adequacy instructions for licensed persons and assigned an add-hoc Module in the Executive Regulations entitled “Module 17 – capital adequacy instructions for licensed persons”.
licensed companies seek to comply with the capital adequacy requirements. Therefore, they approach consulting firms as outsource to help them develop policies and procedures manual for preparing the capital adequacy reports, as well as preparing plans to meet the required regulatory capital ratios in case the available ratios are lower.
What is capital adequacy?
The term capital adequacy expresses the capabilities of financial institutions (banks and investment companies) to provide liquidity to meet short-term liabilities and to raise up enough capital that can withstand operational and investment risks, so that in in case such risks are materialized, financial institutions will not go bankrupt or collapse. This further enhances the stability and efficiency of the financial systems worldwide.
The term capital adequacy has emerged in the wake of the repercussions of the global financial crisis in 2008, which called for members of the Basel Committee to hold several meetings until it approved a set of recommendations in November 2010 that should be committed by the Basel Committee members in order to address the implications of the crisis and avoiding recurrence. This step was followed by the Central Bank of Kuwait “CBK” issuing instructions to banks, and later CMA instructions for licensed companies.
What is the periodicity of issuing capital adequacy reports and the deadlines for submitting them to the Capital Markets Authority?
The licensed person shall submit capital adequacy reports on a quarterly basis, provided that the report is provided to the Authority within forty-five days from the end of the financial reporting period.
What is the added value to business entities from preparing capital adequacy reports?
- Ensure compliance with the regulatory requirements issued by Capital Markets Authority.
- Determine the adequacy of the available regulatory capital to avoid risks that may arise from operational and investment activities
Why Baker Tilly to provide this service?
Baker Tilly is distinguished by specialist professional experience and offers the following characteristics carrying added values to our clients as follows:
- A global consulting firm operating in the State of Kuwait;
- Baker Tilly has license as an investment advisor from the Capital Markets Authority;
- Local experience under an umbrella of a global network;
- Professional team with in- depth experience in providing Accounting Consulting Services;
- Bilingual team.