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| A view of the 1978 Saudi Arabian Monetary
Agency Head Office, designed by Minoru
Yamasaki. |
The Saudi
Arabian Monetary Agency (SAMA), established
in 1952 with U.S. technical assistance,
is the country’s central bank and works
within the framework of Islamic law. SAMA
acts as a banker to the government. It issues
and controls currency, regulates the money
supply, regulates and monitors commercial
banks (including deposits, loans and investments),
and manages foreign assets. The agency also
fixes monetary policy to encourage price
and exchange rate stability, and controls
the financial system. Since 1981, SAMA has
pegged the Saudi riyal (SR) to the dollar.
In order to minimize exchange risks for
the private sector, to facilitate long-term
planning and to encourage repatriation of
capital from abroad, the government has
kept the exchange rate at SR 3.75/US$ 1
since 1987.
Favorable economic
conditions combined with great efforts in
the banking sector have led commercial banks
in Saudi Arabia and other Gulf Cooperation
Council (GCC) countries to achieve robust
growth over the past few years. Commercial
banks in Saudi Arabia saw capital and reserves
go up by 22.4 % during the first quarter
of 2005, while their profits rose to SR5.1
billion ($400 million) during the same period.
The Saudi banking
system is modern and well developed, based
on financial standards and payment systems
that are equivalent to those in major industrial
countries. With strong management and the
latest technologies, banks offer a wide
range of products to suit customer needs.
The sector is also subject to strict supervision
to ensure banks meet international regulatory
requirements.
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SAMA has pegged
the Saudi riyal to the dollar and
kept a stable exchange rate since
the 1980s
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“The banking
sector is highly capitalized, highly profitable
and has high liquidity. It has a very well
developed infrastructure, for both payment
and settlement, and provides modern electronic
banking services,” says Hamad Saud
Al-Sayari, Governor of SAMA. In order to
cater to the expanding economy and keep
abreast of technological developments in
consumer banking, SAMA has created a series
of banking implements such as the Saudi
Arabian Riyal Interbank Express (SARIE)
and the Saudi Payments Network (SPAN).
The first of
the two is a payment and settlement system
linking all the banks in the kingdom, which
went into action in May 1997. It allows
banks to exchange funds, and to transfer
and direct debit messages for customers
and
for trading. Using SARIE, all Saudi commercial
banks can settle payments in the national
currency.
The second
was put into operation in 1990. SPAN comprises
the national automated teller machine (ATM)
and points-of-sale network connecting all
Saudi banks, and was created primarily to
encourage the use of banking systems. Acceptance
of the system has been positive, with the
total number of transactions, SPAN cards,
points-of-sale terminals and ATMs increasing
on an annual basis. The system also has
direct connections to international credit
associations such as Visa and MasterCard.
“The use of electronic payments has
multiplied substantially and it is now a
necessity that people cannot live without,”
says Mr. Al-Sayari.
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