General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
August 24, 2018

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Saudi Arabia. Directors agreed that increasing small and medium enterprise finance, improving financial sector access, and developing the debt market are priorities. They welcomed the efforts of Saudi Arabian Monetary Authority (SAMA) to strengthen liquidity management and encouraged the authorities to continue to strengthen the effectiveness of their Anti-Money Laundering/Countering the Financing of Terrorism framework.

The staff report states that increasing financial development and inclusion while maintaining financial stability are key policy priorities. Reforms to strengthen liquidity management should continue, while macro-prudential policies can be used countercyclically within a well-defined framework. Moreover, legal reforms have advanced considerably over the past year. The new insolvency law is expected to go into effect in August. The authorities explained that all government licensing and regulatory requirements are being reviewed, streamlined, and automated, including enabling online, rather than in person, applications. Staff welcomed the authorities’ focus on financial development and inclusion as set out in the recent Financial Sector Development Program. Significant equity market reforms have been implemented by the Capital Market Authority (CMA) and the authorities are now working to develop the domestic debt market. SAMA noted the progress made in implementing the recommendations from the 2017 financial system stability assessment (FSSA). Additionally, Appendix V to the report summarizes the progress in implementing the key 2017 Financial Sector Assessment Program (FSAP) recommendations.

Staff agreed with SAMA that banks are well-positioned to weather negative asset quality and liquidity shocks. Reported nonperforming loans increased only modestly during 2017 to reach 1.6% of loans (1.4% at end-2016), the risk-weighted capital ratio increased to over 20%, and returns on assets and equity increased as interest margins rose. The introduction of IFRS 9 will result in a manageable increase in provisions for banks and SAMA will need to continue to carefully monitor banks’ approach to loan classification. SAMA has actively employed macro-prudential tools. SAMA explained that it has used the loan-to-deposit ratio, the loan-to-value (LTV) ratio and the risk-weight on mortgage loans to avoid what it viewed as an unnecessary tightening of credit conditions. Staff agreed that macro-prudential instruments should be used countercyclically within a clear framework, but raised some questions about the recent increase in the LTV ratio for first-time home owners to 90% (from 85%), which is quite high by international standards, at a time when retail mortgage lending is growing strongly. SAMA responded that the risks to financial stability from this change are extremely limited given the low average LTV ratio, the small share of mortgage lending in banks’ portfolios, and very low mortgage default rates. 

The selected Issues report highlights that the banking sector dominates the financial system. The commercial banks include 12 domestic banks (four of which have large public-sector ownership) and 12 foreign banks (1% of total assets), with the four largest banks representing 55% of banking system assets. SAMA has developed guidelines for mapping the risk profile of Islamic products to the Basel framework and the guidelines are being consulted upon with banks. Bank cross-border exposures in funding and lending are limited and regionally diversified. The report also goes on to discuss the capital market reforms and fintech initiatives in Saudi Arabia. 

 

Related Links

Keywords: Middle East and Africa, Saudi Arabia, Banking, Securities, Article IV, FSAP, FSSA, IMF

Related Articles
News

FASB Issues Minor Improvements to Financial Instruments Standards

FASB issued an Accounting Standards Update (ASU No. 2019-04) that clarifies and improves areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825).

April 25, 2019 WebPage Regulatory News
News

APRA Grants License to New Authorized Deposit-Taking Institution

APRA announced that it has granted Judo Bank Pty Ltd a license to operate as an authorized deposit-taking institution without restrictions, under the Banking Act 1959.

April 24, 2019 WebPage Regulatory News
News

BoE Report on Evaluation of Approach to Concurrent Stress Testing

BoE published a report on the evaluation, by the Independent Evaluation Office (IEO), of the effectiveness of the approach of BoE to concurrent stress testing.

April 24, 2019 WebPage Regulatory News
News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 22, 2019 WebPage Regulatory News
News

FDIC Specifies Submission Timeline for FFIEC 031, 041, and 051 Reports

FDIC published the financial institution letters (FIL-21-2019 and FIL-22-2019) that offer guidance on submission of Call Reports FFIEC 051, FFIEC 041, and FFIEC 031 for the first quarter of 2019.

April 19, 2019 WebPage Regulatory News
News

US Agencies Propose to Revise Call Reports FFIEC 031, 041, and 051

US Agencies (FDIC, FED, and OCC) proposed to revise and extend, for three years, the Call Reports FFIEC 031, FFIEC 041, and FFIEC 051.

April 19, 2019 WebPage Regulatory News
News

US Agencies Propose to Amend Rule on Supplementary Leverage Ratio

US Agencies (FDIC, FED, and OCC) are proposing to revise the capital requirements for supplementary leverage ratio, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

April 18, 2019 WebPage Regulatory News
News

EIOPA Held InsurTech Roundtable on Use of Cloud Computing by Insurers

EIOPA had, on April 11, 2019, hosted its Fourth InsurTech Roundtable on the use of cloud computing by insurance undertakings.

April 17, 2019 WebPage Regulatory News
News

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News
News

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2958