The Financial Markets

Abstract

The Saudi financial sector comprising commercial banks, the insurance sector and non-bank financing companies came out of the 2008/2009 global financial and credit crisis relatively unscathed, thanks to an accommodating policy of the Saudi Arabian Monetary Agency and a somewhat conservative Saudi banking sector compared to their international peers. Although some Saudi banks were forced to take large loan loss reserves to cover for possible domestic corporate defaults and exposure to some high-profile Saudi names, they are still in a better position when compared to the collapse of major banks and other financial institutions in the USA and Europe. Thus far only a limited number of Gulf banks have publicly admitted and quantified their exposure to the US subprime crisis. Only one Saudi part-government-owned Bahrain-based bank – Gulf Investment Bank – admitted to such exposure amounting to around $966 million and had to raise additional capital. In Saudi Arabia, SAMA was quick to announce that no serious Lehman Brothers exposure to Saudi banks existed, amid serious doubts that with time such exposure might well surface or might not be acknowledged. Some financial players in the Saudi market seemed to be directly affected though by events in the USA, and Tawniya, the leading Saudi insurance company, lost nearly two thirds of its market trading value in 2008, not because of any problems in its operating business but through possible exposure to dealings with the troubled US insurance giant AIG, which had to be bailed out by the US Treasury.

When money speaks, the truth is silent.

Russian proverb