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Saudi Arabia mulls new finance regulations

Wednesday 29 September 2010 - by Will Henley

Saudi Arabia may be forced to introduce a slew of new financial reforms to help improve domestic mortgage supply, the country’s central bank has suggested.

In an upbeat report on the kingdom’s economic performance over the past year, Saudi Arabian Monetary Agency governor Dr Muhammed Al-jasser remarked this week that there was an “absence of a regulatory framework” in the country.

The governor, pointing to a lack of affordable housing, said: “[There is a need to address] the weakness of funding sources due to the absence of a regulatory framework. Here lies the importance of issuing financing and mortgage laws.”

In his speech, delivered to Saudi Arabia’s ruler, King Abdullah bin Abdul Aziz, Al-jasser said that the kingdom had taken steps to maintain the “soundness” of the banking system following the global financial crisis, including steps to improve banking liquidity and facilitate foreign exchange swaps.

Backing international efforts by the Financial Stability Board to improve capital adequacy levels, liquidity risk management and hedge funds and rating agencies transparency, the governor confirmed that Saudi Arabia was "paying attention" to capital adequacy ratios and "loan provisions for countercyclicalities".

New international standards would “enhance significantly” the position of global institutions, he said.

Al-jasser continued: “The most prominent measures [implemented over the last year] were reducing the statutory reserve requirements ratio, the repo and the reverse repo rates several times, enhancing the liquidity position in the banking system by placing long term deposits in the local currency and US dollar with local banks on behalf of government institutions and organisations, [and] facilitating foreign exchange swaps in order to provide the necessary liquidity in US Dollar for the local banking system.”

The governor was speaking as the Saudi Arabian Monetary Agency published its annual report. Referring to the report, the governor reported that Saudi Arabia's GDP dropped to 0.6 per cent during 2009, compared with 4.2 per cent the previous year. Inflation stood at 5.1 percent in 2009 compared to 9.9 percent in the preceding year.

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2011-03-21 04:39:14 | Anonymous
thank you