UPDATE 1-Kuwaiti lender KFH says provisions at $1.6 bln

* Kuwait Finance House says provisions stand at $1.6 bln

* Says provisions declining

(Adds details, background)

DUBAI, Oct 26 (Reuters) - Kuwait Finance House (KFH) (KFIN.KW), the country's biggest Islamic lender, said on Monday that its provisions were declining but had set aside 460 million dinars ($1.6 billion).

Chief Executive Mohammad al-Omar, speaking to Al Arabiya television, did not give a comparative figure or a time frame.

Several major Kuwaiti investment firms have been hit hard by the global financial crisis and are struggling to meet debt requirements.

KFH, in which the country's sovereign wealth fund owns a 24.1 percent stake, said in September that it did not have large exposure to the debt of local investment firms and still had a strong financial position.

KFH said separately in September that had it rescheduled 132 million dinars in debt for Kuwait's Aref Investment Group (AIGK.KW).

"The central bank has instructed banks to be more conservative in case of any surprise," Mustafa Behbahani, a director at Kuwait's Gulf Consulting Co, said about KFH's provisions.