Speech of His Excellency the Governor

Dr. Fahd Bin Abdullah Al-Mubarak

at the Press Conference on the Occasion of

Issuing the 48^th Annual Report

Dear Audience 

          It gives me great pleasure to welcome you all at SAMA, and I thank you for attending this conference on the occasion of issuing the 48^th annual report of SAMA. We hold this conference after having had the honour of presenting the report to His Majesty the Custodian of the Two Holy Mosques, His Royal Highness the Crown Prince, and His Royal Highness the Second Deputy Premier.

           At the beginning I would like to review briefly the latest economic developments in the Kingdom. Our national economy continued its growth for the thirteenth consecutive year. The Kingdom�s real GDP is estimated to have grown by 6.8 percent in 2012 i.e., more than double of the world economy growth rate in the same year. The private sector is expected to grow by 7.5 percent. The growth recorded by the Kingdom has been attributable to increased government spending, particularly on infrastructure projects; as well as the achievements made in the area of streamlining and development of regulations which contributed to improvement in business environment and enhanced domestic and foreign investments. It is also due to the loans provided by domestic banks to finance different economic activities in the Kingdom.

          In 2012, the Kingdom recorded an actual budgetary surplus of Rls 386 billion. The public debt was down to less than Rls 100 billion, which was less than 4 percent of GDP. The Kingdom also registered the largest surplus in the balance of payments in its history, estimated at Rls 670 billion. The inflation rate declined from 5.0 percent in 2011 to 4.6 percent in 2012, bearing in mind that the inflation rate in emerging economies stood at 6.1 percent in 2012. The bulk of inflation in the Kingdom was accounted for by a rise in the indices of house rent and foodstuff prices.

With a positive outlook to the future, the Kingdom has maintained its high credit rating (AA-), while a number of industrialized countries are witnessing a decline in their credit rating. This enhances confidence in our national economy and makes it more attractive for investment.

In the area of banking industry, our domestic banks continued to play their role in serving the national economy equipped with the latest secure technologies in the field of banking services. Bank credit for the private sector increased by 16.4 percent in 2012 to one thousand billion riyals. Our domestic banks have maintained their good financial solvency with a capital adequacy averaging 18.8 percent at the end of 2012. The banks' profits exceeded Rls 33 billion, increasing by 8.4 percent from 2011 profits.

Currently, the number of domestic and foreign banks operating in the Kingdom amounted to 24, (12 domestic banks and 12 branches of foreign banks). To achieve a better spread over the regions and provide service to larger segments of citizens and residents, the number of banks� branches operating in the Kingdom rose by 50 or 3.0 percent in 2012, reaching nearly 1,700 branches. The number of ATMs stood at 13,000, rising by more than one thousand machines or 8.6 percent as compared to the end of 2011. The number of POS went up by 4.2 percent to reach 93,000.

In the insurance sector, SAMA has continued to guide the sector towards further regulation and work in accordance with high professional standards and practices, in order to raise the competence level of its employees and provide better insurance services to policyholders. The sector continued its growth, with the number of companies operating in insurance and reinsurance amounting to 33, in addition to 166 insurance related services companies supporting insurance services. Total written premiums amounted to Rls 21 billion in 2012, compared to Rls 18.5 billion in 2011, recording a growth rate of 13.5%. The ratio of insurance premiums to GDP stood at 0.76%, indicating great prospects for growth in this sector in the coming years. The ratio of Saudis working in this sector rose to 55% in 2012 compared with 40% in 2007. SAMA seeks to increase this ratio and continuously follows up plans pursued by companies to qualify and develop the skills and abilities of their employees to contribute to the provision of qualified national cadres in this sector.

In the finance area, SAMA published the implementing regulations of the finance laws, after His Excellency the Minister of Finance issued the Implementing Regulation of the Real Estate Finance Law. SAMA also issued the Implementing Regulation of Financial Leasing Law after agreement with H.E. the Minister of Justice. SAMA also issued the Implementing Regulation of the Law on Supervision of Finance Companies.

SAMA will supervise and monitor the finance sector in accordance with the best international recognized practices and take necessary actions to maintain its soundness, stability and fair dealings therein. It will also encourage lawful and fair competition between financiers and use proper means to further develop the sector, Saudize its jobs, and promote efficiency of its employees. For achieving the cherished goals of the finance laws, SAMA will cooperate and coordinate with the appropriate authorities, namely the Ministry of Finance, Ministry of Justice, Ministry Commerce and Industry, and Ministry of Housing.

For the purpose of regulating the finance sector and protecting rights of participants therein, the Real Estate Finance Law�s Implementing Regulation provides for the standards and conditions that need to be observed when practicing this activity. The Implementing Regulation sets a regulatory framework for real estate refinance, forming a basis for establishment of a secondary market that will contribute to provision of the required liquidity and decrease the finance cost on the consumer. The Public Investment Fund will participate in the ownership of the Saudi Real Estate Refinance Company by contributing Rls 5 billion to its capital.

The Implementation Regulation of the Finance Leasing Law sets forth the provisions related to the contracts of the finance leasing. It also defines the obligations and basic rights of the lessor and the lessee, such as determining the amount of ownership right, and the entitlements of the lessor and the lessee in case of contract termination or cancelation. The Implementation Regulation regulates registration of finance leasing contracts in accordance with the best practices in this field by a company to be established for this purpose.

With respect to the Implementation Regulation of the Finance Companies Control Law, it provides for supervisory and control provisions for the finance sector, including licensing requirements, conditions and procedures, and rules for the finance companies' work and the regulatory standards to be complied with in practicing the activity. The Regulation provides for the requirements and standards needed to protect consumer rights in finance services. These include the annual percentage rate calculation method of the finance, and clarity of procedures and standards of early payment.

The Law on Supervision of Finance Companies has granted operating finance companies and institutions two years period before the Law comes into effect to settle their positions or exit the market in accordance with the provisions of the Law and to report the results to SAMA during the first nine months starting from the effective date of the Law.

It is expected that activation of finance laws will have a positive effect on the development and improvement of finance activity in the Kingdom. It will also promote the levels of services provided by making use of available assets and capital to create new finance sources for finance companies, activities through the primary and secondary markets. This will be reflected on the economic activity in a positive way and will create more job opportunities.

In conclusion, I would like to welcome again this distinguished host of media and press personalities, and I will be pleased to answer your questions.