RIYADH, 23 May 2007 — Saudi Arabia will adopt the Basel II risk-based capital framework at the start of next year to strengthen the country’s financial system, the central bank governor said yesterday.

The Basel II accord, adopted by the Basel Committee on Banking Supervision, aims to align global bank capital standards and introduces new formulae to more closely tie capital requirements to asset risk, replacing a less differentiated standard in force since 1988.

“The Saudi Arabian Monetary Agency is currently orienting Saudi banks to adopt Basel II standards on capital sufficiency by Jan. 1, 2008,” Hamad Saud Al-Sayyari told a conference on corporate governance in the banking sector.

“I expect all banks to easily manage to comply with capital requirements which will reflect positively in consolidating both the culture of risk management and corporate governance in banks,” he added.

Sayyari told reporters that Saudi banks had been preparing for implementation of Basel II requirements for two years now.

Over the past year, Saudi banks have increased their capital mainly through bonus share issues.

Meanwhile, Arab National Bank (ANB), Saudi Arabia’s sixth largest lender by market value, said yesterday it has abandoned plans to expand through regional acquisitions to focus on growth in the domestic market.

“We are not thinking about making bids to buy any bank,” Chairman Abdullatif Al-Jaber told Reuters in an interview.

ANB’s Chief Executive Robert Eid said in March the bank was looking for acquisition opportunities after it lost the race to buy an 80 percent stake in Egypt’s Bank of Alexandria. Italy’s Sanpaolo bank paid $1.6 billion for the stake in the first big Egyptian state bank to be privatized.

“Our bid for the Egyptian bank was with our partners in Arab Bank ... we (ANB) have turned away from this idea. If a second opportunity presents itself, we will not consider it. We prefer to focus on our country,” Jaber said.

ANB is 40 percent owned by Jordan’s Arab Bank , which has since said it plans to raise its own capital to finance acquisitions. Arab National expects to benefit from public and private spending in major infrastructure and housing projects on the back of the economic boom fuelled by high oil receipts, he said.

“We have large projects in our country and there are huge business opportunities, people (foreign banks) love to come and work here, so why should go elsewhere.” The potential in the Saudi market is strong enough to help the bank post a growth in net profit at the end of 2007, Jaber said.

ANB’s net profit in the first quarter rose 3.5 percent, making it the only lender of 10 listed Saudi banks to post a growth in net profit during that period. “For 2007, we should continue on the same pace” of growth in first-quarter profit, he said.