Saudi Arabia: Financial System Stability Assessment

IMF Staff Country Reports, October 5, 2017

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This paper assesses the stability of Saudi Arabia’s financial system as a whole.
Banks—the core of the Saudi financial system—remain liquid and resilient.
Stress tests show that most banks, including all systemically important banks, would be able to continue operating and meeting regulatory capital requirements in the event of additional severe economic shocks, characterized by oil prices falling substantially below current levels.
Despite the recent liquidity challenges, all banks would also be able to cope with additional adverse liquidity shocks.
The authorities’ ambitious agenda for improving macro- and microprudential financial sector oversight should be fully implemented and, in some cases, enhanced and further refined.

Fully implement the authorities’ agenda for improving macroprudential and microprudential financial sector oversight.
Enhance and further refine selected elements of the oversight agenda where appropriate to address identified vulnerabilities.
Maintain focus on liquidity management frameworks and funding strategies given recent liquidity challenges.

Severe economic shock scenario: oil prices falling substantially below current levels—under this scenario, stress tests indicate most banks, including all systemically important banks, would continue to meet regulatory capital requirements.
Liquidity shock scenario: despite recent liquidity challenges, all banks would be able to cope with additional adverse liquidity shocks.

Subjects: Asset and liability management; Banking; Commercial banks; Financial institutions; Financial sector policy and analysis; Financial sector stability; Liquidity; Liquidity management; Macroprudential policy.
Keywords: asset quality; balance sheet composition; banking system; commercial bank; Commercial banks; control department; CR; EWS analysis; exchange rate; financial condition; Financial sector stability; funding strategy; Global; ISCR; Liquidity; liquidity condition; Liquidity management; liquidity management framework; Macroprudential policy; price index; repo facility; risk profile; Sama manage liquidity; Sama strategy document.