Saudi financial sector well placed to overcome COVID-19 crisis - SAMA governor

The central bank — also known as SAMA — has been and continues to be strict in its application of international standards, and so are other institutions in the Kingdom, Almubarak said at the Financial Stability Conference in Riyadh on Thursday.

SAMA was applying the Basel II international regulatory framework for banks during the global financial crisis and is currently adhering to its successor Basel III. That meant the Kingdom’s banks had the reserves and the strength to deal with all the consequences back then, and the same has been true during the COVID-19 pandemic, the governor said.

Capital coverage for Saudi banks is 20 percent, liquidity is 80 percent and non-performing loans are only about 2 percent, he said.

The banking, finance and insurance sectors are all well placed to overcome the current crisis, Almubarak said.

Moreover, SAMA has been seeking not just to protect the financial sector, but also to ensure that the economy continues to perform, he added.

SAMA has undertaken a number of actions to protect parts of the private sector, in particular small and medium enterprises, and has launched four programs, including loan deferrals, according to AlMubarak.

Banks and finance companies have deferred repayments on more than 100,000 loan contracts worth more than SR200 billion ($53.3 billion), he said.

SAMA injected SR50 billion into banks depending on the loan volumes that had been deferred, he said.

In March 2020, SAMA and Kafalah launched a SR13.2 billion loan guaranteed program guaranteeing 95 percent of SME loans that has enabled the provision of 7,500 new contracts, he said.

SAMA has also invested in the Kingdom’s digital payments infrastructure, helping to reduce costs on digital payments by SR1.2 billion, he said.

The insurance sector is strong and has a healthy filling margin of more than 170 percent, a loss rate of less than 80 percent, and subscription growth of 10 percent?, he said.

The mortgage sector has witnessed growth for both individuals and companies, Almubarak said. Retail mortgage loans from banks do not constitute more than 20 percent of the credit portfolio, he said.

These levels are reasonable, and mortgage loans, in general, do not constitute more than 25 percent of the credit portfolio, he added.

Individual purchase of homes help achieve more than one goal, according to Almubarak. They become homeowners, in line with Vision 2030 goals, granting citizens an asset instead of paying rent, and it helps move the construction, real estate and land sectors, which further drives the economy, he said.

SAMA is monitoring the growth of mortgage loans so it does not affect financial stability in the Kingdom, the governor said.