Featured Product

    IMF Releases Reports on 2019 Article IV Consultation with Saudi Arabia

    September 09, 2019

    IMF published its staff report and selected issues report in context of the 2019 Article IV consultation with Saudi Arabia. Directors welcomed the continued resilience of the financial sector and ongoing capital market reforms. They agreed that the development of agency banking and fintech could help broaden the channels of financial access. Directors agreed that improving financial access is important but emphasized that specific sector lending targets should be avoided.

    The staff report highlights that banks are well-positioned to weather asset quality and liquidity shocks. SAMA explained that with credit and liquidity conditions improving and no evidence of financial imbalances emerging, it has kept macro-prudential policies unchanged over the past year. In line with recommendations from the 2017 Financial System Stability Assessment (FSSA), new bank licensing guidelines were issued in December 2018, the guidelines for rescheduled and restructured loans (to ensure consistency of treatment by banks) are being drafted, and MoUs are being discussed with several central banks. SAMA has also continued to develop its liquidity management framework—producing weekly and monthly liquidity forecasts. The report mentions that non-performing loans (NPLs) of banks edged up to 2% in the fourth quarter of 2018 but remain low, while bank capital and return on assets are strong. IFRS 9 has had no significant impact on bank balance sheets.

    Mortgage lending is expanding rapidly against the backdrop of declining house prices, as highlighted in the report. The IMF staff encouraged SAMA to continue to closely monitor the quality of real estate lending and to reduce, if needed, the loan-to-value (LTV) ratio (which was increased to 90% in early 2018) for first-time buyers. SAMA explained that mortgage loans are a small share of bank credit, the average LTV is comfortably below the limit of SAMA, and that risks are reduced by the salary assignment of loans and government guarantees on a large share of new mortgages. SAMA indicated that it is closely monitoring mortgage lending and has recently fined a number of financial institutions for violating the responsible lending policies. The staff advised against setting lending targets for specific sectors and noted that mergers between large banks would increase market concentration while common ownership of banks could reduce incentives for competition and innovation. Additionally, the staff welcomed efforts to improve financial access under the Financial Sector Development Program (FSDP). The authorities said that they are exploring agency banking and fintech to help broaden the channels of access to financial services and increase market competition, particularly in areas outside the major cities, and noted that the entry of five new foreign banks over the past year will boost competition. 

     

    Related Links

    Keywords: Middle East and Africa, Saudi Arabia, Banking, Fintech, NPLs, IFRS 9, Macro-Prudential Policy, Mortgage Lending, LTV, SAMA, Credit Risk, IMF

    Featured Experts
    Related Articles
    News

    PRA Amends Pillar 2 Capital Framework for Banks

    PRA published the policy statement PS2/20 that contains the final amendments to the Pillar 2 framework and provides feedback to responses to the consultation paper CP5/19 on updates related to Pillar 2 capital framework.

    January 23, 2020 WebPage Regulatory News
    News

    FED Proposes to Revise Information Collection Under Market Risk Rule

    FED proposed to revise and extend, for three years, FR 4201, which is the information collection under the market risk capital rule.

    January 22, 2020 WebPage Regulatory News
    News

    MAS Amends Notices on Minimum Liquid Asset Requirements for Banks

    MAS published amendments to Notices 1015, 613, and 649 related to the minimum liquid assets (MLA) requirements.

    January 21, 2020 WebPage Regulatory News
    News

    APRA Publishes Submission on Fintech and Regtech

    APRA published its submission, to the Senate Select Committee, on financial technology and regulatory technology.

    January 21, 2020 WebPage Regulatory News
    News

    ECB Consults on Guideline on Threshold for Credit Obligations Past Due

    ECB published a draft guideline, along with the frequently asked questions (FAQs), on the definition of the materiality threshold for credit obligations past due for less significant institutions.

    January 20, 2020 WebPage Regulatory News
    News

    BIS Discusses Role of Central Banks in Addressing Climate Change Risks

    BIS published a book that reviews ways of addressing the climate change risks within the financial stability mandate of central banks.

    January 19, 2020 WebPage Regulatory News
    News

    FSB Report Examines Global Nonbank Financial Intermediation Activity

    FSB published the ninth annual report examining the global non-bank financial intermediation activity.

    January 19, 2020 WebPage Regulatory News
    News

    OSFI Publishes Instruction Guide on Solvency Information Return

    OSFI published an instruction guide to assist administrators of pension plans in completing the Solvency Information Return that is required to be filed with OSFI.

    January 17, 2020 WebPage Regulatory News
    News

    EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms

    EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9.

    January 16, 2020 WebPage Regulatory News
    News

    FDIC and OCC Issue Statement on Heightened Cyber Security Risk

    In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk.

    January 16, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4515