Saudi Banking Health: Saudi Arabian Monetary Agency

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October 28, 2008

SABB Bank in Riyadh. (Photo: Patrick Ryan)

Saudi Banking Health:
Central Bank Governor Update

Editor's Note:

Members of the Organization of Petroleum Exporting Countries (OPEC) met in Vienna on Friday [October 24] in an "extraordinary" meeting called to address the impact of the global economic situation on the oil market. Gulf Cooperation Council (GCC) finance and economy ministers and central bankers met a day later in Riyadh to examine the effects on their economies. And on Sunday Saudi Arabia's central banker, Hamad Al-Sayari of the Saudi Arabian Monetary Agency (SAMA) met the press to provide assurances on the strength of the Kingdom's banking sector. This IOI provides a report by Adnan Jaber of Arab News on the press conference followed by an extensive collection of related reports links and SUSRIS archived materials, including recent financial conditions reports by Brad Bourland of Jadwa Investments.

No bank has liquidity problem � Kingdom�s foreign assets are safe, says Al-Sayari
Adnan Jaber

The governor of the Saudi Arabian Monetary Agency (SAMA), Hamad Al-Sayari, said yesterday that no Saudi bank faces liquidity problem and that the stock market downturn does not have anything to do with the country�s fundamentals but is due to people�s fear.

Addressing a press conference here, Al-Sayari said SAMA expects the nonoil sector in the Kingdom to maintain the growth rate of the past year -- between 5 percent and 6 percent.

"Government spending rose above 19 percent over the past nine months, while the volume of bank loans rose 39 percent in the third quarter of this year," Al-Sayari said.

Hinting at the government's plan to go ahead with development projects in anticipation of a surplus budget this year, Al-Sayari said: "Economic growth will be strong by the end of the current year and in the next year, particularly in the nonoil sector."

Al-Sayari noted that several investors who used to take loans from banks abroad are now approaching Saudi banks. "This indicates the robustness of the Kingdom�s financial health."

"The rise in the volume of foreign deposits in Saudi banks -- which has surpassed the assets of Saudi banks in foreign institutions -- reflects the surge in people�s confidence in the Saudi banking sector as a safe haven," the central bank governor said.

Al-Sayari reiterated the Kingdom�s decision to stick to the monetary policy it is currently following with regard to the exchange of the Saudi riyal.

"SAMA has adopted a monetary policy to suit the domestic situation while it monitors the liquidity situation on a daily basis and takes decisions to suit the domestic market," said Al-Sayari, denying suggestions that the withdrawal of bank deposits was on the increase.

"The guarantee given by the Supreme Economic Council for banks and deposits has increased confidence in the local banking sector," he added.

Al-Sayari also affirmed that the foreign assets of the Kingdom are safe and managed in a conventional risk-free manner. "The only impact made on foreign assets was the currency exchange rates, but this does not call for any change in the movement of assets."

He attributed the restrictions enforced by SAMA as the reason why Saudi banks are safe from the current turmoil facing banks the world over.

SAMA pumped liquidity of up to $3 billion into the Kingdom�s domestic banks a week ago. At the same time, banks had a total of SR25 billion in deposits with SAMA, showing an excellent liquidity status and solvency, he said.

A number of economic analysts believe that the current global crisis will have the least impact on the Saudi economy as the Kingdom does not have any direct investments in those financial institutions that have been affected by liquidity problems. Muhammad Al-Katheeri, secretary-general of the Riyadh Economic Forum, said the Kingdom�s economic prosperity, industrial and export strategies, and diversification of sources of income are factors that would minimize the adverse effects of the crisis on the Kingdom.

Muhammad Al-Shimeimari, a financial analyst, said the conservative monetary policy of SAMA has yielded positive results.

Source: Arab News

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