RIYADH: Mohammed Al-Jasser, deputy governor of the Saudi Arabian Monetary Agency (SAMA), said yesterday that the Kingdom has focused its efforts on protecting its financial stability by increasing liquidity in order to confront the aftermath of the global economic crisis.
“The government has adopted a policy of increased spending to reduce the effects of global economic recession,” Al-Jasser said while addressing the last working session of the Global Competitiveness Forum here.
He said the failure of supervisory measures on banks, wrong attitude of credit rating agencies, compensations paid to investors and the reluctance of banks in extending loans were some of the main reasons for the world financial crisis.
He said governments and central banks had taken exceptional measures to bail out affected financial organizations. “This again worsened the financial crisis,” he pointed out.
Al-Jasser said the Kingdom moved from concentrating on inflationary pressure to achieving financial stability and taking supervisory measures.
“Saudi banks were more selective in their credit options,” he said.
The global financial crisis, he said, caused the depletion of a large amount of wealth, the largest since World War II. “We expect that the present crisis would lead to better financial management.”
He proposed pumping large amounts into banks in order to help them resume their activities.
Thomas Russo, former vice chairman of Lehman Brothers, which was one of the first victims of the global financial crisis, refused to talk about the reasons that led to the collapse of his company. However, he pointed out that consumer spending in the US, which accounts for 70 percent of the gross domestic product, was declining considerably.
“We see today remarkable decline in the sales of retail shops. Many employees are being retrenched. This demands from us to make wise financial policies,” he said. “We know that when a person has a heart attack it will prompt him to change his lifestyle.”
Saleh Kamel, one of the founders of Islamic banking, also addressed the international gathering. Kamel, who is chairman of the General Council for Islamic Banks, wanted credit rating agencies as well as accounting and auditing companies held responsible for misguiding the world as they rated financial organizations on the verge of bankruptcy highly.
“Why don’t they try them in criminal courts?” Kamel asked. “Had it happened in our countries, there would have been a huge outcry.”
Kamel also held the World Bank responsible for the crisis because it ignored the reasons that caused the crisis. “Where was the World Bank, which is based in Washington, when the crisis erupted in the US? Why did it not issue any guidelines to the American economy like it does with regard to Third World economies?” he asked.
Kamel emphasized the need for multiplicity in world economic leadership, instead of depending on a single one, and getting rid of interest-based economies.
“We need an economy based on justice and not on interest,” he said.
Henry Kravis, founding partner of Kohlberg Kravis Roberts Co., agreed with the observations of Al-Jasser and Kamel, and said governments and company managers are to blame for the crisis.
“The problem has affected all economic sectors,” he said and urged the United States to save the world from the present crisis by bringing about reforms in its banking system. He also said that banks should start providing loans.
Stephen G. Pagliuca, managing director of Bain Capital Partners LLC, emphasized the need for keeping a balance in all financial dealings. “We cannot solve this world problem within a day or night,” he said.
