Banking Studies, 2002).
Organization of International Banking in Kuwait, together with Major Participants
There are nine banks domiciled in Kuwait serving the banking market in Kuwait. These banks include commercial, investment, real estate, and savings banks (Kuwait Institute of Banking Studies, 2002). The savings bank, the Savings and Credit Bank of Kuwait, is an Islamic financial institution. The National Bank of Kuwait dominates the Kuwaiti banking sectors. The Bank Controls approximately 40 per cent of the domestic banking market in Kuwait ("Kuwait to Let Foreign Banks in", 2001).
Several Kuwaiti-based banks have offices in other countries. With one exception, however, Kuwaiti law prohibits the operation of international banks in Kuwait. This single exception is the Bank of Bahrain and Kuwait that has its home office in Bahrain (Kuwait Institute of Banking Studies, 2002).
There are two ways form foreign banks other than the Bank of Bahrain and Kuwait to participate in the banking sector in Kuwait. First, foreign banks may participate as correspondent banks in arrangements with Kuwaiti banks (Info-Prod Research Middle East Ltd., 2002). Correspondent banks provide banking services to citizens of one country in another country through the cooperative activity of the corresponding banks in the two countries. Thus, a Kuwaiti firm doing business in Europe or North America can make payments to suppliers in other countries and receive payments from creditors in other countries. The corresponding banks in the two countries facilitate the processing of these transactions.
Kuwaiti banking clients, however, do not have the option of selecting the correspondent bank in another country. The local Kuwait bank establishes correspondent banking arrangements. To some extent, foreign banks compete for correspondent business with Kuwaiti banks; however, correspondent banking is not a major profit center for a bank.
The se...