Financial Sector Assessment : Saudi Arabia
The capacity of the banking sector to respond to macroeconomic shocks, and regional uncertainties have been strengthened considerably over the past decade. Historically, the operating environment has been volatile as a result o f pervasive dependen...
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| Language: | English en_US |
| Published: |
Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2005/01/5597805/saudi-arabia-financial-sector-assessment http://hdl.handle.net/10986/15941 |
| Summary: | The capacity of the banking sector to
respond to macroeconomic shocks, and regional uncertainties
have been strengthened considerably over the past decade.
Historically, the operating environment has been volatile as
a result o f pervasive dependence on the hydrocarbon sector
and swings in investor confidence associated with
uncertainty in the region. This experience has helped shape
fairly risk-averse portfolios: the bank-led financial system
has functioned with substantial capital-adequacy ratios
(CAR), loan-loss provisions, and liquidity buffers. The
sector is highly profitable, with returns on assets
averaging above 2 percent, supported by a large, low-cost
demand deposit base. These buffers are underpinned by an
effective regulatory and supervisory structure that
proactively contains risk taking through the use o f maximum
loan-deposit ratios, caps on individual and corporate
indebtedness, and pre-approval requirements on foreign
lending. The sector is supported by a modem and efficient
payment and settlement infrastructure. |
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