A stochastic cost frontier approach is used to estimate technical efficiency of Kuwaiti Banks. Using earning assets as output and fixed assets, labor and financial capital as inputs, I have found that banks produce earning assets at constant returns to scale and hence have less to gain from increasing scale of production notably, through merging with other banks, than from reducing their technical inefficiency. Except for the largest two banks, NBK and GB, there is large room for improving technical efficiency of most of the banks. In order to account for differences in technical inefficiency between banks, I have linked the adopted measure of inefficiency to some relevant variables. The results show that larger bank size, higher share of equity capital in assets and greater profitability are associated with better efficiency. In lights of the results, it is argued that the only way for banks to better meet the challenge of increased competitive pressure from more powerful banks and future foreign entry would be to increase technical efficiency. For this, banks ought to appoint skilled bankers and managers, improve, through continuous training, the skills of existing employees, de-link management from ownership, enlarge the share of equity in total assets and broaden the base of ownership. Privatization of banks could also improve corporate governance that leads to better efficiency through lower intermediation margins and spreads and a wider range of services.