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areas related to financial sector supervision. For example, in 2003, SAMA invited the Financial Action Task Force to carry out an assessment of its laws, policies, practices in the area of anti-money laundering and combating terrorist financing. Also, it invited the IMF to carry out the Financial Sector Assessment Program (FSAP). These assessments will provide a useful benchmark for Saudi authorities to compare their supervision of the financial system against international standards.

Enhanced Corporate Governance. Another important feature of the Saudi financial and banking sector has been a strong culture of corporate governance. As early as 1992, SAMA issued guidelines for the members of the Board of Directors of Saudi banks on their responsibilities. This was followed by issuance of guidance and rules on a variety of topics including the internal controls, the internal audit function, the internal audit committees, etc. Furthermore, Saudi banks were required to appoint two external auditors from the leading international audit firms. Also SAMA insisted that banks follow both the Saudi Arabian and the International Accounting Standards to present their financial statements. In recent years SAMA has required all Saudi banks to implement IAS #39 which is a major step towards fair value accounting. SAMA has also encouraged Saudi banks to participate in the annual Basel Committee Survey of Transparency of International Banks. Currently Saudi banks’ financial statements reflect the highest level of transparency amongst the banks of the emerging market countries.

Impact of New Technology. Looking ahead, the Saudi Financial and Banking System is poised to take advantage of its large investments in new technologies. Most importantly there is still a room for the full utilization of the capabilities of the 1997 Saudi

Riyal Interbank Express (SARIE), Transfer System. This system is

which is a Real the backbone of

Time Gross Settlement Electronic Fund the Saudi payments infrastructure with

significant capacity to enhance all other payment and capabilities for B2B and B2C business applications.

settlement systems. It also provides Another electronic share trading and

information system (Tadawul) capability and to permit trading

has recently been enhanced to provide of government bonds, treasury bills and

T+0 settlement mutual funds in

addition to corporate shares. of critical importance to the

This system functions as an electronic stock exchange implementation of the new Capital Market Law. Saudi

and is banks

are now offering telephone electronic commerce. It is

and internet banking worth noting that the

services and working to further promote Saudi telecommunications infrastructure

can support all new technologies in the financial sector. Consequently the future of Saudi financial sector is closely dependent on the timely selection, adoption implementation of new technologies. Saudi Arabia is determined to maintain its lead in area.

the and this

New Products and Services. Another important dimension of the future of the Saudi Financial System is the continued growth of banks’ off-balance sheet and fiduciary

activities. investments

By the end of 2003, Saudi banks of SR 53.9 billion. In addition, banks

managed 170 investment funds with offer international stock brokerage and

fiduciary banking services. Given markets in the world the potential

that Saudi for growth

Arabia in this

is one area is

of the largest private banking immense. Saudi Banks have

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