2023-04-17 17:15:20
The concerns recently launched by the International Monetary Fund regarding the credit risks of what are known as non-bank financial institutions, is a matter that calls for caution and the need for a comprehensive review of the internal conditions in each country, to ensure the soundness of the financial system. These non-banking institutions provide various financial services similar to those provided by conventional banks, and mainly include insurance companies, financing companies, financing, investment and hedge funds, as well as all parties that have financial derivative contracts.
Al-Eqtisadiah also mentioned in its report that global financial stability has become dependent on institutions that everyone deals with with a lesser degree of importance and interest in dealing with banks, which are the cornerstone of the international financial system. This is at the global level, but in the Kingdom, the financial system differs in some aspects, and in that there are positive points that are calculated in the interest of the local financial system, as a result of the conservative policy practiced by the Central Bank towards the mechanisms for providing financial services, their conditions and channels of provision.
Most of the financial operations in the Kingdom are carried out through official banks, despite the policy of openness pursued by the Central Bank in the past few years, through which a large number of new financial technology companies were allowed to carry out activities that were until recently monopolized in the banking sector. However, the credit risks related to these companies so far are limited as a result of the existence of controls related to the volumes of funds that are dealt with, and the necessity for these companies to pass the conditions for providing financial services and prior application through the experimental work environment.
The banking sector in Saudi Arabia has been known for many years for its strong financial strength in terms of fulfilling the requirements of capital adequacy and the strength of the systematic supervision of banks practiced by the Central Bank over all banks operating in the Kingdom, and the seriousness of the Central Bank in applying control and compliance with its requirements. There is no doubt that the banking policy in the Kingdom has benefited from the experiences of some countries in laying the foundations of the financial system.
From the experiences that the United States went through and resulted in a number of laws and instructions to avoid the negatives that appeared there, the experience of savings and financing associations that were widespread in the United States, which caused one of the largest financial crises that the country went through, immediately stands out. Earlier, there were more than three thousand savings and financing associations, and within a few years more than two-thirds of this number collapsed as a result of the inability of these associations to deal with economic fluctuations that led to high interest rates in a short period. These associations used to receive deposits from people and provide real estate and personal loans, and due to the high interest rates in the eighties, there were financing gaps between the low long-term benefits that associations obtain from borrowing operations, and the high short-term interest that must be paid to depositors.
There are no financing associations in the Kingdom in this way, and only banks are allowed to receive customer deposits, so all financial institutions are directly subject to the control of the Central Bank, or subject to it indirectly through the supervision of the Capital Market Authority over some financial institutions. Insurance companies in the Kingdom also differ from insurance companies in some countries in the limited financing services they provide. Loans cannot be provided to individuals or companies through insurance companies, and there is no demand for any of the savings products offered by insurance companies, unlike some countries that Insurance companies play major financing roles.
Today, the assets of banks in the Kingdom of Saudi Arabia stand at about 3.7 trillion riyals, and there is a largely controlled growth in the volume of bank credit with limited percentages in cases of default, in addition to the high quality of financial safety indicators. This situation differs from many countries, as reports indicate that the global financial assets of non-banking institutions are close to half the size of all global financial assets. Although there are concerns about some contracts related to financial derivatives in the Kingdom, there are great efforts made by the Central Bank to reduce the risks of financial derivatives, which require reporting on these transactions and carrying out clearing procedures through central clearing platforms, to reduce risk and raise the level of transparency in those transactions. transactions.
1681764718
#Nonbanking #institutions. #danger