KUWAIT CITY/RIYADH - Saudi Arabia has called for strict banking regulation and conservative lending regimes but spoke out against the need for a global financial supervisor, five days ahead of a G20 meeting where regulation will take center stage.
The G20 member said it wished to strengthen regulatory institutions vis-a-vis banks, and that it was working actively ahead of the Scotland meeting of central bankers and finance ministers to make its views heard.
“We need to promote regulatory frameworks and conservative policies giving the regulators and not the institutions the last word,” Governor of the Saudi Arabian Monetary Agency (SAMA) Muhammad Al-Jasser said at a financial conference.
Western G20 states as well have advocated a crackdown on banker pay and regulation in the wake of the financial crisis. Saudi Arabia itself has suffered severe consequences from the crisis.
Gulf regulators and central bankers are grappling with a multi-billion dollar debt restructuring at two large family businesses - Saad Group and Ahmad Hamad Algosaibi and Brothers - seen as the biggest blow to hit the Middle East since the start of the crisis.
Jasser said, however, that a single, over-arching super-regulator would do more harm than good and that countries needed to enact countercyclical policies that would dampen the highs and cushion the lows of economic swings.
“If there was a super-regulator where they attempted to impose specific policies, they would have asked us like in the UK to have soft-touch regulation, telling us that supervision does not need conservative measures or policies.”
“Saudi Arabia is trying to reflect the fears and concerns of the developing countries, namely the Arab and Gulf countries,” he said, saying that the sovereignty of each state needed to be respected.
“We are undertaking a very active role and expressing those fears and concerns on your behalf ahead of the G-20,” he told a conference of Arab bankers and central bankers.
Al-Jasser joined Chinese Commerce Minister Chen Deming who warned on Sunday against an early withdrawal of stimulus measures, citing the risk of another world slump.
“The world economy is still in a recession with high unemployment rates and scarcity of credit despite the huge fiscal and monetary stimuli,” Al-Jasser said in a speech at an economic forum in Kuwait. “The activation of stimulus exit strategies is still too early as it needs good timing and gradualism during the next few months.”
Central banks have started to pare emergency measures taken at the height of the financial crisis. Japan’s central bank said on Oct. 30 that it will stop buying corporate debt at the end of the year.
Australia last month became the first Group of 20 nation to raise its benchmark interest rates since the height of the crisis and Norway followed.
Moreover, the Saudi central bank kept interest rates unchanged in the third quarter, it said on Monday, viewing a further rate cut as unlikely to spur lending while a rate hike was unnecessary given tepid inflation.
The SAMA said it held its main rate at 2 percent because of declining inflation and a need to support lending in the banking sector hit by debt restructuring concerns in family firms. The reverse repo rate stayed at 0.25 percent.
It has slashed its benchmark lending rate by 200 basis points over the past year as an oil price collapse sent the top Arab economy into a downturn and inflation fell from record highs.
The Kingdom, which pegs its currency to the US dollar, has to keep its monetary policy synchronised with the US Federal Reserve to prevent speculative pressures on the riyal currency.
SAMA last changed the key rate in January, when it cut it by 50 basis points. It halved the reverse repo rate in June in a bid to discourage banks from placing money at its accounts. – Reuters