Kuwait

Banks and the Digitization of Traditional Banks I. Introduction and Legal Definition Digital banks, as defined by the Central Bank of Egypt, are “banks that provide banking services through digital channels or platforms using modern technological techniques.” In practice, they operate without physical branches, offering services entirely through online platforms. The branchless nature is not merely a technological choice but a structural model intended to eliminate the cost and operational burdens associated with traditional banking infrastructure. A distinction must be drawn between digital banks and similar emerging models. Neobanks operate online without an independent banking license, relying instead on licensed partner banks to deliver core financial services. Their performance is measured largely by the number of onboarded customers. Challenger banks, on the other hand, hold a full banking license, assume regulatory responsibility, and compete directly with traditional banks. Their performance is measured by profit generation through disciplined risk management. This distinction is fundamental: a neobank is a technological interface, while a challenger bank is a complete banking institution under full regulatory scrutiny. II. Digital Banks vs. Digital Transformation of Traditional Banks Digital banking should not be confused with the digitization of traditional banks. A native digital bank is built from inception on a modern, cloud-based core infrastructure, integrated end-to-end for real-time operation. Traditional banks typically upgrade their customer interface while retaining legacy backend systems that were not originally designed for digital delivery. This infrastructural divergence generates measurable cost differences. Pure digital banks operate with significantly lower fixed costs — in many markets, 60–70% lower — due to the absence of physical branches and reduced staffing requirements. Customer journeys reflect this efficiency: opening an account may require 36 interaction steps with a digital bank, compared to 85 steps with some traditional banks. The latter figure illustrates not merely a user experience shortcoming, but a technological limitation embedded within legacy architecture. III. Licensing Frameworks and Legal Basis Licensing is the legal foundation that determines the operational capacity and regulatory status of a digital bank. Two prevailing models exist internationally and in the region. 1. Electronic Money License This license allows the provision of digital payment and wallet services with lower capital requirements. However, it prohibits the use of client funds for lending or investment purposes, and in most jurisdictions, client balances do not fall under conventional deposit protection schemes. Entities under this license may also be restricted from using the term bankcommercially. 2. Full Banking License A full banking license grants authority to offer the complete spectrum of banking services, including deposit-taking, lending, credit products, and use of client funds for financing. This privilege comes with heightened regulatory obligations, continuous oversight by the Central Bank, and mandatory participation in deposit protection frameworks. Across the region, Central Banks have developed regulatory structures reflective of their economic priorities. In Saudi Arabia, a digital bank must be incorporated as a local joint-stock company, with founders demonstrating both financial and technological expertise, supported by an exit plan. In Egypt, a minimum paid-up capital of two billion Egyptian pounds is required, along with restrictions on branch establishment and an initial limitation on extending credit to large commercial borrowers. In Kuwait, licensing is structured through four regulated stages with emphasis on environmental and financial sustainability, requiring applicants to present a five-year business plan accompanied by an exit strategy. IV. Risk Landscape and Supervisory Response Digital banks must navigate a risk environment distinct from that of traditional institutions. For customers, two concerns dominate public perception. The first is cybersecurity, where the absence of physical channels concentrates systemic risk into a single digital environment. Despite advances in encryption and cloud protection, a significant breach could incapacitate the entire service framework. The second concern is the reduced human element. While automation reduces cost and increases speed, customer trust historically depends on interpersonal engagement — a paradox that digital banks must resolve. From an institutional perspective, competition presents another challenge. As traditional banks accelerate digital transformation, the competitive advantage of newly-licensed digital banks narrows. Profitability compounds the difficulty: established banks rely on low-cost deposits, while digital banks frequently attract liquidity by offering higher interest rates, increasing their cost of funds and reducing lending margins. Furthermore, the cost of legal compliance — particularly in anti-money laundering (AML) and cybersecurity — absorbs much of the operational savings gained by branch-less models. Supervisory authorities have therefore shifted attention toward technology-centric oversight. AML compliance under digital onboarding environments requires robust electronic know-your-customer (e-KYC) controls to prevent identity fraud. Cybersecurity frameworks now emphasise resilience, continuity and real-time monitoring, while outsourcing regulation has grown in significance as cloud-native institutions depend heavily on third-party infrastructure. V. Conclusion A digital bank is not merely a traditional bank with a mobile application. It is a legally distinct model, defined by its licensing category, technological foundation, and risk profile. The structural advantage of digital banks lies in cost efficiency, systemic integration and speed of execution, yet these benefits are counterbalanced by cybersecurity exposure, trust-building challenges, and higher capital costs for liquidity. Regulators in the region have responded with increasingly mature legal frameworks focused on cyber resilience, e-KYC integrity, outsourcing risk management, and financial stability. As global markets push toward reduced cash dependency and automated fund movement, the need for specialised legislation grows accordingly. A clear regulatory environment enhances market confidence, protects consumers, and ensures that innovation evolves within the boundaries of risk-controlled financial governance. Digital banking, therefore, represents not merely a technological shift, but a legal and economic restructuring of how financial services are conceived, delivered and supervised. Dr. Fayez Al-Fadli Arkan Legal Consultations

Kuwait has taken a significant leap toward modernizing its notarization system with the issuance of Decree Law No. 147 of 2025, which amends provisions of Law No. 10 of 2020 on notarization. The new law unveils structural reforms that impact how a power of attorney (POA) is granted, renewed, and authenticated in Kuwait. This legislative update doesn’t just strengthen but also shifts the country to align with global best practices in documentation and E-governance. The reform aims to reduce miss use of indefinite authorizations while ensuring periodic verification of representation rights and accelerating Kuwait’s transition toward digital legal services. The Key Changes Include A five-year limit on the validity of all new Powers of Attorney. The automatic expiration of pre-existing POAs within two years. The formal recognition of electronic signatures as legally binding and enforceable. The Decree applies to the following All new Power of attorneys Existing notarized powers executed before the decree’s issuance, which remain valid for only two years from the date the law takes effect. Electronic notarization systems approved by the Ministry of Justice and related government entities. After the expiry of the transitional two-year period, any old power of attorney not renewed in accordance with the new law will automatically lose validity. Key Legal additions under Article 2 of the Decree Article 2 of Decree Law No 147 of 2025 adds two new articles to Law 10 of 2020 which are Article 5 bis and Article 9 bis which represent the foundation of the reform. Article 5 bis states that “Except for commercial agencies and any agencies exempted by decision of the Minister of Justice, a power of attorney shall be valid for five (5) years unless a shorter term is agreed or the agency terminates for another reason. The notarization shall specify the expiry date. The expiration of the notarization period shall not affect the validity of the agency between the parties”. This addition is designated to prevent endless delegation of authority and ensure that representation rights are periodically renewed reducing outdated authorizations. While Article 9 states that “The concerned parties or their representatives may appear before the notary in person, through the accredited electronic system, or by visual connection using modern or electronic means. The implementing regulation shall prescribe the procedures for each case, determine when personal attendance is required or remote appearance permitted, and regulate the manner of recording and evidencing such notarizations in the official registers and all other related provisions”. This addition established legal infrastructure for full digital notarization, in line with Kuwait’s shift toward online government services and paperless documentation. Why legal practitioners should take note The reform closes loopholes created by issuing lifetime power of attorney. Clients can now sign and validate documents remotely through secure electronic systems. Lawyers and companies must review and renew all existing power of attorney before the two-year deadline. Firms that adapt early can guide clients through renewals, reducing risk exposure and maintaining validity of representation. Conclusion The introduction of Decree law No.147 of 2025 marks a pivotal moment in Kuwait’s notarization framework. By limiting the duration of Powers of Attorney, mandating renewal and embracing electronic and remote notarization, the law stabilizes legal certainty with technological progress. These amendments especially the additions to article 2 promote accountability and prevent misuse of indefinite authorizations and modernize how legal documents are executed and authenticated. Critically, these reforms are set to significantly streamline national projects across Kuwait by fostering greater efficiency and transparency in legal processes. This digital transformation directly supports the ambitious objectives of Kuwait Vision 2035, positioning the country as a leader in digital legal services and contributing to sustainable economic development. For practitioners the reform presents an opportunity to lead clients into an era of digital security and transparent documentation aligning with the nation’s strategic future. Authors: Asad Ahmad, Legal director and Ahmed Al Buaijan, Trainee Lawyer

The State of Kuwait has enacted Decree-Law No. 148 of 2025, introducing substantial amendments to Law No. 20 of 2014 on Electronic Transactions (the Electronic Transactions Law). The reform broadens the Law’s scope and reinforces the legal recognition of electronic records, documents, signatures, and transactions across civil, commercial, administrative, and personal-status matters. It forms part of Kuwait’s wider digital-governance initiative aimed at enhancing service efficiency and reducing reliance on paper-based procedures. Under the amended framework, electronic instruments now have the same legal and evidentiary effect as their paper equivalents, provided they meet the procedural and technical requirements prescribed by law. The amendment further confirms that electronic contracts, communications, and registers are legally valid and enforceable, removing uncertainty regarding the reliability of digital documentation before courts and administrative bodies. Procedural and Technical Requirements Pursuant to Article (9) of the amended Law, an electronic document or record shall have legal effect if all of the following conditions are satisfied: It is preserved in the form in which it was created, sent, or received, or in a manner that reliably proves the accuracy of its data at the time of creation, sending, or receipt; Its contents are capable of being stored and retrieved at any time; It identifies the creator or sender and specifies the date and time of creation, sending, or receipt; and It is saved in an electronic format pursuant to the conditions and rules established by the competent supervisory authority. Similarly, Article (19) provides that an electronic signature shall be deemed a protected electronic signature if it fulfills the following requirements: The signatory can be clearly identified; The signature is uniquely linked to the signatory; The signature is created using a secure signature tool under the exclusive control of the signatory at the time of signing; and Any alteration to the data associated with the signature or its link to the signatory can be detected. The Executive regulations will further specify the detailed technical controls and standards governing these conditions. Practical Implications In practice, these reforms enable public authorities, financial institutions, and private entities to: Execute and store contracts, notices, and records entirely through electronic means; Transition toward fully digital filing and registration systems; Shorten processing timelines and reduce administrative costs; and Rely on electronic registers established by competent authorities as valid proof of rights and obligations. Compliance Considerations In light of Decree-Law No. 148 of 2025, companies should promptly align their internal practices with the new amendments. Key preparatory steps include: 1. Adopt Secure and Verifiable E-Signature Tools Ensure all e-signature systems satisfy the criteria under Article (19), including signatory identification, exclusive linkage to the signer, control at the time of signing, and tamper-detection capabilities. 2.Implement Reliable Electronic Archiving Systems Establish compliant electronic record-keeping aligned with Article (9), ensuring data accuracy, retrievability, and traceability through standardized metadata, timestamps, and system logs. 3.Update Internal Policies and Templates Revise corporate policies, document templates, and approval workflows to formally recognize the legal validity of electronic records and signatures. Decree-Law No. 148 of 2025 was published in the Official Gazette on 23 October 2025 and entered into force on the date of publication. This measure represents a significant milestone in Kuwait’s legal modernization and its continued shift toward a comprehensive digital transformation of public and private sector processes. Authors: Asad Ahmad, Legal Director and Fahad Al Zouman, Trainee Lawyer

This year, Kuwait’s merger control regime has been reshaped by legislative reforms and constitutional challenges. The framework now requires close attention to the scope of notifiable transactions, the financial thresholds that trigger a filing obligation, and the exemptions designed to exclude routine restructurings. Parties must also navigate detailed notification requirements, supporting documentation, filing fees, and a multi-stage review before the Kuwait Competition Protection Agency (“CPA”). Recent constitutional rulings—most notably the 2025 decision striking down the CPA’s power to impose revenue-based fines—have added a new dimension to enforcement and signal further reform on the horizon. Merger control in Kuwait is governed by Law No. 72 of 2020 on the Protection of Competition and its Implementing Regulations, issued under Resolution No. 14 of 2021 and amended by Decree No. 25 of 2022. Together, they establish the CPA, prohibit anti-competitive practices, and set out merger control obligations, review procedures, and exemptions. This overview walks through the scope of notifiable transactions, the financial thresholds that trigger notification, and carve-outs for routine restructurings, before outlining the notification process, documentation, and filing fees. We then explain the CPA’s multi-stage review and monitoring practices and concludes with constitutional developments—particularly the ruling that limited the CPA’s power to impose revenue-based fines—and their implications for enforcement and legislative reform. A merger control filing with the CPA is required when a transaction (i) qualifies as an economic concentration. Under the Competition Law, an economic concentration includes mergers, acquisitions of control, and joint ventures that create an autonomous economic entity. In the event a transaction is considered an economic concentration, then the financial thresholds must be analysed. The obligation to notify the CPA is triggered when certain financial thresholds are met, based on the audited financial statements of the preceding fiscal year. Specifically, notification is required if any of the following financial thresholds are met (“Financial Thresholds”): One party to the concentration generates revenues in Kuwait exceeding KWD 500,000; The aggregate revenues of all parties exceed KWD 750,000; OR The registered assets of the parties in Kuwait exceed KWD 2.5 million. The Competition Law provides several exemptions to ensure that routine transactions are not unnecessarily subjected to merger control filings. These exemptions include acquisitions by banks, insurance companies, and financial institutions engaged in securities trading, provided they do not exercise substantive voting rights and dispose of the securities within one year of acquisition. The disposal period may be extended by the CPA upon a justified request demonstrating that disposal was not reasonably practicable within the one-year period. Exemptions also apply to acquisitions arising from insolvency, defaults, debt restructuring, or settlements with creditors are excluded, as are intra-group restructurings within the same economic group. These carve-outs reflect the legislature’s intent to capture only those transactions that materially affect market structure and competition in Kuwait. Parties must notify the CPA within 60 days of signing the transaction agreement or related contract. However, in practice, the CPA does not strictly enforce this 60-day requirement. A binding agreement is not strictly required before notification; it is sufficient for parties to file based on a letter of intent, memorandum of understanding, or a good faith intention to reach an agreement. The merger control notification must include detailed corporate documents, financial statements, transaction agreements, market share data, competitor information, and an economic report addressing the potential effects on competition in the relevant market. The filing fee is 0.1% of the combined paid-up capital or Kuwaiti assets of the parties, whichever is less, capped at KWD 100,000, with a minimum charge above zero. The review process before the CPA involves several steps. Once a filing is submitted, the CPA chairman has five days to refer the application to the executive director for review. The executive director then conducts a substantive examination of the transaction, which must be completed within 90 days. This period may be extended if additional information is required or if third-party objections are raised. After the executive director’s assessment, the matter is referred to the CPA’s board of directors, which must issue a decision within 30 days on whether to approve, conditionally approve, or reject the transaction. The parties must be formally notified of the board’s decision within 15 days, ensuring transparency and closure of the review process. In practice, clearance typically takes around 45–60 calendar days from the time a complete application is submitted, though delays are common if filings are incomplete or contested. Importantly, transactions cannot be implemented before clearance; violations can result in fines or orders to unwind the transaction. These include fines of up to 10% of total revenues for failing to notify an economic concentration or for submitting misleading or incorrect filings, and the same ceiling for anti-competitive agreements or abuse of dominance. Lesser violations—such as obstructing CPA investigations, failing to comply with obligations after notice, or providing misleading information—carry fines of up to 1% of revenues from the previous fiscal year. In parallel with these sanctioning powers, the CPA has a designated department tasked with reviewing transactions published on social media platforms to ensure that any notifiable transactions, which have not submitted a merger control filing, are investigated and then referred to the CPA disciplinary board. The CPA has sent investigatory letters to both local and foreign parties requesting information and details surrounding published transactions they are involved in. GLA has played a key role in moulding the Kuwait merger control landscape. In February 2025, GLA successfully represented a client facing significant CPA sanctions.  In a landmark ruling by the Kuwaiti Constitutional Court, which significantly altered the CPA enforcement capabilities. The Court declared Paragraph (1) of Article 34 of Law No. 72 of 2020 unconstitutional. This provision had empowered the CPA’s disciplinary board to impose financial penalties of up to 10% of a party’s total revenues for violations of Articles 5–8 (anti-competitive agreements and abuse of dominance). The challenge, successfully argued by GLA & Company Senior Partner, Nader Al Awadhi, on behalf of the Union of Cooperative Societies, was based on constitutional principles, including: Violation of due process and judicial oversight (penalties were imposed administratively, not judicially); Lack of proportionality between penalties and violations; and Encroachment on protections of private ownership and personal liberty. The ruling curtails the CPA’s ability to impose revenue-based fines and raises questions about the validity of past sanctions. Going forward, merger control enforcement will likely need to rely on judicially supervised remedies or amended legislative provisions consistent with constitutional safeguards. Further, by establishing constitutional precedent, the ruling has already influenced subsequent cases, including one that struck down the 1% fine for non-compliance as unconstitutional, and has intensified calls for legislative reform. As a result, draft amendments to the Competition Law have been introduced and are currently awaiting approval. .Kuwait’s merger control regime features relatively low financial thresholds that capture both domestic and cross-border transactions. Parties must prepare comprehensive filings and anticipate a few rounds of queries within the review period. However, the Constitutional Court’s ruling striking down the CPA’s power to impose steep turnover-based fines introduces a new layer of legal complexity. Companies engaging in mergers and acquisitions in Kuwait should closely monitor forthcoming legislative or regulatory adjustments as the state reconciles the Competition Law framework with constitutional requirements. Authors: Asad Ahmad, Head of Anti-Trust & Competition and Fahad Al Zouman, Trainee Lawyer.