Saudi cbank says policies shield banks from financial crises

The Saudi Arabian Monetary Agency (SAMA) has been adopting several measures like capping of loans to the real estate sector and having banks raise provisions for bad loans to maintain stability in the financial sector, the kingdom’s central bank said in its 2015 Financial Stability Report.

Other precautionary measures set by SAMA include a requirement that banks maintain a minimum of 10.5 percent capital adequacy ratio in accordance with Basel III framework.

The central bank also requires banks to maintain a healthy debt-to-capital ratio, asset-to-equity ratio, and loan-to-deposits ratio.

SAMA, knowns for its conservative policy which cushioned the kingdom against the worst of the global and regional financial crisis, insists on placing a cap on real estate loans to avoid creating a bubble that plagued the real estate sector in neighboring countries in 2008-2009.

It has also set requirements that limit the foreign exposure of Saudi banks.