RIYADH, 11 February — The Saudi government has indicated that the private sector should fully bear the consequences of its lending policies and not expect an official bailout in the event of a crisis.
This was declared by Minister of Finance and National Economy Dr. Ibrahim Al-Assaf at the fifth annual meeting of Middle Eastern and North African chief executives that concluded here yesterday. Chief executives from 53 major banks of the MENA region participated in the conference organized by Riyad Bank in collaboration with Washington-based Institute of International Finance.
Earlier, Governor of the Saudi Arabian Monetary Agency Hamad Al-Sayyari spoke on SAMA’s past achievements and current priorities.
Pointing out that the government has been exploring various means to address the volatility of the capital market stemming from the current international situation, the minister stressed the need for a mechanism to ensure that "there is no presumption of an official bailout to rationalize the pricing and transmission of capital and thus help reduce volatility."
He said a proposal was under discussion for evolving a new approach to sovereign debt restructuring. "A major feature of this proposal is to allow the introduction of a standstill to provide a country in crisis breathing space to reach agreements with its creditors. However, this proposal is still at a very early stage and is subject to major legal, logistical and sovereignty issues."
Referring to the post-Sept. 11 scenario, the minister said the government’s first priority is to ensure a robust and sustained global economic recovery. However, despite the global slowdown which had a negative impact on the Gulf economies, there are signs that the downturn may have bottomed out.
Dr. Al-Assaf called upon developed countries to increase the capital flow to the developing countries as part of an international effort to reduce volatility in the capital market. At the same time, he said, recipient countries need to have appropriate policies for addressing the concerns of the international community. He pointed out that close monitoring "and supervision of the lending institutions, especially of the hedge funds, is important."
The events of Sept. 11, he observed, brought to the forefront efforts to combat money laundering and financing of terrorism. The Kingdom has been fully engaged in these international efforts. "Indeed, Saudi Arabia is one of the first countries to approve and enact all 40 recommendations of the Financial Action Task Force."
The minister, however, reiterated the government’s resolve to honor secrecy of bank accounts. "No details of bank accounts will be divulged except after intricate procedures and orders signed by the finance minister," he stated.
Dr. Al-Assaf said the Kingdom’s priorities include reducing the high dependence on oil, further promoting private sector growth, and boosting employment opportunities for Saudis through training programs. "Focus also remains on raising the competitiveness of the economy to help meet the challenges of globalization."
Al-Sayyari called upon the regional financial institutions and their regulators to ensure that they develop their securities and financial markets to retain the excess capital in the region and, more importantly, repatriate significant regional wealth currently invested elsewhere.
