2005年-世界发展银行全球_Financial_Sector_Assessment___Saudi_Arabia_22页_2mb

Financial Sector Assessment of Saudi Arabia (January 2005)

I. Overview

Saudi Arabia's financial system has developed in a context of significant challenges, including a large and rapidly growing population and an economy heavily dependent on the hydrocarbon sector. The system has experienced stability and growth since the early 1990s, supported by the Saudi Arabian Monetary Agency (SAMA), which has strengthened the regulatory and supervisory framework. Payment and settlement systems are modern and efficient, and systemic liquidity is well-organized. However, the system must be further consolidated and expanded to better serve the economy's financial service demands.

To address the challenges of economic growth and diversification, the authorities have initiated several reforms, including new laws for capital markets, insurance, AML/CFT, and pensions, as well as the development of leasing and mortgage financing legislation. These reforms have significant potential for financial sector development, though their effectiveness will depend on implementation quality.

II. Overall Assessment

Resilience to Shocks

The banking sector is resilient to a range of single and combined shocks, supported by conservative portfolios, substantial capital cushions, and an effective regulatory structure. Stress tests indicate that the system can withstand various credit, liquidity, and interest rate events. The sector is highly profitable, with returns on assets averaging above 2 percent, due to a large, low-cost demand deposit base.

Liquidity Management

Liquidity risk management infrastructure is developing, though further evolution is needed. The use of derivative products to augment liquidity in the government securities market may have limits. Improving the inter-bank repo market through SAMA's pricing adjustments and increasing the tradable stock of government securities are recommended to enhance liquidity arrangements and yield curves.

Risk Management and Reforms

The authorities have taken significant steps to enhance market transparency and regulatory compliance. The Capital Markets Law (CML) and Cooperative Insurance Law (CIL) are major milestones toward meeting international standards. However, some areas remain underdeveloped, such as the legal framework for defining terrorism financing and the coordination of SAMA with the new Capital Market Authority (CMA) and Ministry of Commerce and Industry (MoCI).

III. Core Challenges

Economic Dependence on Hydrocarbons

The financial sector operates in an open capital account economy heavily reliant on the hydrocarbon sector, which accounts for one-third of GDP. This dependence limits the system's ability to diversify credit and macroeconomic risks, as credit recipients are vulnerable to the same fluctuations. Non-oil GDP has grown at 3-4 percent annually, but skill mismatches and modest growth constrain the economy's ability to reduce the high unemployment rate.

Financial Inclusion

Expanding access to financial services for underserved groups, particularly in the context of a growing and youthful population, is a key challenge. The financial system must balance product diversification with maintaining stability.

Legal and Cultural Context

The legal and judicial system is based on Islamic Sharia, which influences financial practices. The financial authorities have successfully developed a profitable banking system by adapting to these foundations. However, the next stage of development requires careful institutional planning.

IV. Priority Recommendations

Bank Supervision

• Amend the Banking Control Law (BCL) to reflect modern prudential practices and limit the influence of the Ministry of Finance in banking matters.
• Clarify the definition of confidentiality for information exchanges with domestic and foreign supervisors.

Market Infrastructure and Safety Nets

• Adjust SAMA's repurchase and reverse repurchase rates to support secondary market transactions and a more robust yield curve.
• Establish a formalized board of governance for payment system policy and a dedicated oversight team for payment and settlement systems.

Capital Markets

• Enhance the credibility of the Capital Market Authority (CMA) through clear coordination with SAMA and MoCI.
• Amend the Companies Law to remove statutory caps on corporate bond issuance, enabling market development.

Financial Services

• Overhaul the housing finance framework to include effective mechanisms for collateral enforcement.
• Develop similar frameworks for SMEs and leasing to reduce financing costs and promote market-based solutions.

V. Financial System Overview

Banking System

The banking system is fairly developed compared to other upper middle-income countries, with M3 equivalent to 53 percent of GDP. Commercial banks dominate, holding about half of total system assets. Public ownership is extensive, with some banks holding over 70 percent. Foreign banks participate mainly through equity stakes, with joint Saudi-foreign banks accounting for 49 percent of total banking sector assets.

Non-Bank Financial Institutions

Non-bank financial institutions are dominated by quasi-fiscal entities, such as the Autonomous Government Institutions (AGI), which hold a significant portion of government securities. Specialized credit institutions provide interest-free loans for public policy. Leasing, insurance, and licensed money changers account for less than 0.3 percent of total financial system assets, indicating the need for further development.

Housing Finance

The Real Estate Development Fund (REDF) provides zero-interest housing loans but faces challenges due to high demand and limited capacity. Linking REDF to the banking sector could help catalyze a market-based mortgage finance system.

Credit Information Systems

SAMA operates negative lists and a Credit Center to monitor loan portfolios. These systems have improved asset quality, with the ratio of nonperforming loans (NPL) to total loans decreasing from 11 percent to 8 percent between 1999 and 2003. Consumer and margin lending are growing rapidly and require close monitoring.

Equity Market

The equity market is the largest among Arab exchanges, with a market capitalization of nearly $160 billion or 76 percent of GDP. Liquidity has increased significantly, with a turnover ratio improving from 32 percent in 2001 to 137 percent in 2003. Major public offerings and favorable market conditions have contributed to this growth.

Government Debt Market

The government debt securities market is substantial, with total government securities amounting to 637 billion SR (82 percent of GDP). However, the corporate bond market remains underdeveloped due to restrictive issuance caps and high costs.

VI. Regulatory Oversight and Safety Nets

SAMA plays a central role in regulating and supervising the financial sector, including AML/CFT programs. The agency has made progress in implementing technological innovations, though continued monitoring and adaptation are necessary. The system's resilience is supported by a modern payment infrastructure, including the SARIE and SPAN systems. The use of derivatives for liquidity purposes is increasing, but the market remains concentrated and liquidity diminishes for longer maturities.