Exchange of Information on Large Borrowers and on Delinquent Loans. In the early 1980’s, SAMA established a credit information service that provided information to Saudi banks on all large exposures of the Banking System. This enabled banks to better assess the credit position and risk of big borrowers. Also in 1986, SAMA permitted banks to exchange information on delinquent borrowers as a means of applying collective pressure on them. These measures have proved quite effective in resolving problems of delinquent loans.
Some other Measures of Consolidation.
i) Mergers and Formation of Banks. In terms of bank mergers and restructuring in the 1980’s, there were three major events. Firstly, the United Saudi Commercial Bank was formed in 1983, to take over the remaining branches of three foreign banks, namely United Bank of Pakistan, Bank Melli Iran and Banque du Liban d’outer Mer. This completed the process of conversion of foreign bank branches into strong joint-venture banks involving foreign and Saudi shareholders. Also, in 1984 Saudi Investment Bank was given a full commercial license and in 1988 a license was given to Al-Rajhi Banking and Investment Corporation to convert the Al-Rajhi family’s money changing business to a full-fledged commercial bank. With these developments, by 1990 the Saudi banking system had 12 commercial banks of which 9 had foreign shareholders.
ii) Laying the Foundation for a Securitie Market. In 1982, SAMA introduced an instrument known as Bankers Securities Deposit Accounts (BSDA’s). This was a forerunner to the Treasury Bills which followed subsequently. Also in 1985, the Government issued new rules through SAMA permitting the creation of a stock market. A Supervisory Committee including senior officials from SAMA, Ministry of Finance and Ministry of Commerce was established to develop rules and regulations and to establish surveillance system. The day-to-day operations of the shares market and its supervision was left to SAMA.
Subsequently, in 1988 the Saudi Government introduced the Government Development Bonds program to provide an important investment instruments to banks and
other investors in the Kingdom. On behalf Government Securities. Subsequently, SAMA were able to Repo of up to 25% of their Saudi
of Ministry put in place Government
of Finance, SAMA issues arrangement whereby banks Bond holdings with SAMA.
iii) Improved Services through Introduction of Technology.
During the early
1980s, SAMA recognized financial markets through
the potential and the greater investment in
need to enhance and modern technology.
strengthen the Saudi In this area, SAMA
took a leadership role and developed a
comprehensive strategic plan to underlying objectives of this
guide the banking strategy included