reference agency that will maintain data on all borrowers in the Saudi Financial Market. The Saudi Credit Bureau is owned by the private sector under the supervision of SAMA and will be an important institution for strengthening the financial sector.
Credit ratings: While the international rating agencies have continued to carry out solicited and unsolicited ratings of Saudi banks in the last decade, there was an absence of a solicited sovereign rating. Without such a rating international market participants were unable to compare the creditworthiness of Saudi borrowers who in turn were unable to tap the international financial markets. This situation has now been rectified, and in July 2003, a solicited sovereign rating of Saudi Arabia had been announced by Standard and Poor’s rating agency. This rating is A+ for local currency and A for foreign currency borrowings. This first step will go a long way for Saudi companies and financial institutions to tap financial markets for long-term funds. Also this will encourage the development of an indigenous rating agency and perhaps a Saudi corporate bond and commercial paper market in the near future.
Non-bank financial institutions: For the past few years, SAMA has encouraged the formation of non-bank financial companies and in this regard has licensed financial leasing companies and international credit card companies. With the advent of a new Capital Market Law there will be a tremendous boost in the non-bank financial sector. New players including stock brokers, investment fund managers, mutual funds, custodians and trustees, investment advisers, etc, are likely to open businesses. These will include different organizational and ownership structures including domestically owned companies, joint-ventures between foreign and local parties and fully foreign-owned companies. This proliferation will permit greater competition and diversity and lead to lower costs and efficiency.
The Way Forward. In this first decade of the new millennium the Saudi financial system is well poised to leap ahead and take advantage of a strong base developed over
half a century. The financial sector should be
and liberalization, its large
investment a new era
able to leverage its traditions of openness technology and its strong supervisory demands increased participation, greater
competition, enhanced transparency, strong supervision a strong position to rise up to these challenges and growing economy as well as of the customers. The changes augur well for a bright future.
and corporate governance. It is in meet the demands of the rapidly recent legislative and regulatory