KUWAIT, Jan 5 (KUNA) -- The Central Bank of Kuwait said on Tuesday that the draft law for relieving citizens of interest of consumer and installed loans includes many controversial technical, legal and procedural sections, thus rendering it inapplicable The CBK, in a statement coinciding with the parliamentary debate on the bill, said the proposed law "adds heavy and intolerable burden upon the central bank to the extent that will result in total paralysis of its supervision tasks and carries grave and unwarranted risks." From a constitutional perspective, it violates the basic principle of justice and equality before the law and the right of litigation, some of the basic rights of the Kuwaiti society.
Moreover, it weakens confidence in the state financial and banking systems, as well as the stable legal system that affirms the principle of respect for contracts and covenants, in addition to encouraging negative conducts by clients of the banking and financial sectors.
According to statements released by local banks and inevstment companies submitted to the CBK till the end of last September, the CBK statement continued, total volume of the loan assets and consumer and installed financing granted to the citizens, free of interests and poceeds, amounted to KD 4891 million.
Moreover, this asset including the interests and the returns on the mature loans amounted to approximately KD 6709 million, with the difference standing at KD 1818 million, constituting the overall interests and returns of the mentioned asset, to be written off according to the proposed law.

-- Affirming that the principle of relieving some citizens of such financial liabilities constitutes a breach of justice, the CBK statement said other loaners, in the coming years, would request to be treated equally with those who have been relieved of such financial liabilities.
The CBK indicated that such a bill implies that all debt-bearing citizens have failed to pay their dues as scheduled, and this is contrary to the facts that show that only 3.3 percent of the indebted nationals have failed in honoring their financial obligations.
It warned that such an approach would encoruage deception where "unreal loans may be created thus adding to the hefty financial costs upon the state budget." Moreover, it raises the legal issue whether the banks and the investment companies can be compelled to reschedule the loans, for they are governed by contracts with the citizens.
The bill in its first provision states "a blurred definition of the lending client" and the second article fails to specify the timetable of the debts' scheduling.
Moreover, the bill does not include a clear definition of the deposits of the government departments in the banks, where it neither stipulates whether they are interest-free, nor mentions longevity of these assets.
The proposed law does not stipulate adding other government assets to make up for the interests to be cancelled in the re-scheduling.
The state funds, throughout the re-scheduling period reaching 15 years, would not post any yields. On the contrary, they will sustain waste of investment opportunities, a loss that affects rights of the next generations.
The statement also indicated at the difference in tackling such an issue between the conventional and Islamic banks, also noting that the draft law does not mention means of loans granted by the investment companies.
It also contested the term that calls for withdrawal of legal law suits against the defaulters. - Kuna