1-entry Saudi Arabia

1.1 Licensing authority Council of Ministers on

recommendation of the
Minister of Finance and the
Saudi Arabian Monetary
Agency

1.2 Number of banks 10

1.3 Minimum capital entry requirement SR 2.5
1.4 Is information on source of funds for capital required? yes

1.5 Are the sources of funds to be used as capital verified by yes

authorities?
1.5.1 Are law enforcement authorities consulted? yes
1.6 Can assets other than cash/govt. securities be used to yes
increase capital?
1.7 Can borrowed funds be used? no
1.8 Legal submissions required for banking license: 1.8.1 Draft by-laws yes
1.8.2 Intended organization yes
chart
1.8.3 First 3-year financial yes
projections
1.8.4 Financial information on yes
shareholders
1.8.5 Background/experience yes
of future directors

1.8.6 Background/experience yes

of future managers

1.8.7 Sources of funds in yes

capitalization of new bank
1.8.8 Intended market yes
differentiation of new bank
1.9 Number of domestic applications for banking licenses

1.9.1 Number denied

1.10 Number of foreign applications for banking licenses 1
1.10.1 Number denied 0
1.11 Basis for denial of appilications 1.11.1 Capital amount/quality

1.11.2 Banking skills

1.11.3 Reputation
1.11.4 Incomplete application

2-ownership Saudi Arabia

2.1 Is there a maximum percentage of capital that can be no
owned by single owner?
2.1.1 If yes, what is it?
2.2 Can related parties own capital in a bank? yes
2.2.1 If yes, what is the maximum percentage? none
2.3 Regulatory restrictiveness of ownership by nonfinancial unrestricted
firms of banks
2.4 Fraction of capital in 10 largest banks owned by around 40%
conglomerates
2.5 Can non-bank financial firms own shares in banks? yes
2.5.1 What are the limits? none
2.6 What is the 5-bank concentration ratio (%)? 69.3

3-capital Saudi Arabia

3.1 Minimum capital-asset ratio requirement (%) 8
3.1.1 Is it risk-weighted in line with Basle guidelines? yes
3.2 Does the ratio vary with a bank's credit risk? yes
3.3 Does the ratio vary with market risk? yes
3.4 Actual risk-adjusted capital ratio (%) 21.1
3.5 Is subordinated debt allowable (required) as part of yes; though currently no bank
capital? carries any subordinated debt

3.6 What fraction of revaluation gains is allowed as part of 100%

capital?
3.7 Percentage of banking system's assets in banks that are 0
50% or more government owned
3.8 Percentage of banking system's assets in banks that are 0
50% or more foreign owned
3.9 Before minimum capital adequacy is determined, which 3.9.1 Market value of loan no
items are deducted from capital losses
3.9.2 Unrealized securities no
losses
3.9.3 Unrealized foreign yes
exchange losses

4-Activities Saudi Arabia

4.1 Securities permitted
4.2 Insurance permitted
4.3 Real estate prohibited
4.4 Regulatory restrictiveness of bank ownership of restricted
nonfinancial firms

5 & 6 -audit,management,org Saudi Arabia

5.1 Is an external audit compulsory? yes
5.2 Are there specific requirements for the extent of audit ? yes

5.3 Are auditors licensed or certified? yes

5.4 Is auditor's report given to supervisory agency? yes
5.5 Can supervisors meet external auditors to discuss report yes
without bank approval?
5.6 Are auditors legally required to report misconduct by yes
managers/directors to supervisory agency?
5.7 Can legal action against external auditors be taken by yes
supervisor for negligence?
5.8 Has legal action been taken against an auditor in last 5 no
years?
6.1 Can supervisors force banks to change internal yes
organizational structure?
6.2 Has this power been utilized in last 5 years? no

7-liquidity Saudi Arabia

7.1 Are there guidelines for asset diversification? yes
7.2 Are banks prohibited from making loans abroad? no; but banks must obtain prior
approval
7.3 Minimum liquidity requirement (%) 20% of deposit liabilities.
7.4 What interest is paid on reserves? not remunerated
Minimum reserve requirement (%)
How is reserve requiremement renumerated
7.5 What assets satisfy liquidity or reserve requirements? Cash, gold or assets which
can be converted into cash
within a period not exceeding
30 days

8-depositor Saudi Arabia

8.1 Is there an explicit deposit insurance scheme? no
8.1.1 Is it funded by the government, banks or both?
8.1.2 Ratio of accummulated funds to total bank assets
8.1.3 Insurance limit per account
8.1.4 Is there a limit per person?
8.1.4.1 Amount of limit
8.1.5 Does deposit insurance authority make the decision to
intervene a bank?
8.1.6 If no, who does?
8.1.7 If yes, does the deposit insurance authority have the
legal power to intervene/takeover a troubled (not insolvent)
bank?
8.2 As a share of total assets, value of denominated debt
liabilities not covered by explict/implicit savings protection
scheme?
8.3 Number of banks merged/closed (as part of failure
resolution) in last 5 years
8.4 Were depositors wholly compensated the last time a bank
failed?
8.4.1 Average time to pay depositors in full
8.4.2 Longest that depositors waited in last 5 years
8.5 Were any deposits that were not covered at the time of
failure compensated when bank failed?
8.6 Can deposit insurance agency take legal action against
bank directors/officials?
8.7 Has the deposit insurance agency ever taken any legal
action against bank directors/officials?

9-provisioning Saudi Arabia

9.1 Is there a formal definition of "non-performing loan"? no
9.1.1 If yes, what is it? Generally loans are classified
as non-performing after
interest becomes 90 days past
due, and banks are required to
cease interest revenue accrual
into the income statement

9.2 Classification of loans in arrears: 9.2.1 Substandard

9.2.2 Doubtful
9.2.3 Loss
9.3 Minimum required provisioning of loans as they become: 9.3.1 substandard

9.3.2 doubtful
9.3.3 loss
9.4 Other classification systems Banks use a 5 level risk
classification system based on
qualitative judgements, which
are also used to decide on
provisioning

9.5 Ratio of non-performing loans to total assets (%) 0.03

9.6 If one loan is non-performing, are other loans of a no
multiple-loan customer classified as non-performing?

10-disclosure Saudi Arabia

10.1 Does income statement contain accrued but unpaid yes
interest/principal while loan is performing?
10.1.1 Does income statement contain accrued but unpaid no
interest/principal while loan is non-performing?
10.2 Number of days in arrears after which interest income 90
cease to accrue
10.3 Are consolidated accounts covering bank and any non- yes
bank financial subsidiaries required?
10.4 Are off-balance sheet items disclosed to supervisors? yes

10.4.1 Are off-balance sheet items disclosed to public? yes

10.5 Must banks disclose risk management procedures to yes
public?
10.6 Are directors legally liable for erroneous/misleading yes
information?
10.6.1 Have penalties been enforced? yes
10.7 Do regulations require credit ratings for commercial no
banks?
10.7.1 What percentage of top ten banks is rated by 100
international credit rating agencies?
10.7.2 What percentage of the top ten banks are rated by no domestic agencies
domestic credit rating agencies?
10.7.3 Which bank activities are rated? 10.7.3.1 bonds no
10.7.3.2 commercial paper no
10.7.3.3 other yes

11-discipline Saudi Arabia

11.1 Are there any mechanisms of cease-desist type orders yes
whose infraction leads to automatic imposition of civil & penal
sanctions on banks directors & managers?
11.2 Can the supervisory agency order directors/management yes
to constitute provisions to cover actual/potential losses?

11.3 Can the supervisory agency suspend director's decision 11.3.1 dividends yes
to distribute:
11.3.2 bonuses yes
11.3.3 management fees yes
11.4 Any such actions taken in last 5 years? yes
11.5 Which laws address bank insolvency? Banking Control Law ;
company Law
11.6 Can the supervisory agency supercede bank shareholder yes
rights and declare bank insolvent?
11.7 Does banking law allow supervisoy agency to suspend yes
some or all ownership rights of a problem bank?
11.8 Does the law establish pre-determined levels of solvency no
deterioration which forces automatic actions such as
intervention?

11.9 Regarding bank restructuring & reorganization, can 11.9.1 supercede shareholder yes
supervisory agency or any other govt. agency do the rights
following:
11.9.2 remove and replace yes
management
11.9.3 remove and replace yes
directors
11.9.4 forbear certain yes
prudential regulations
11.9.5 insure liabilities beyond yes
any explicit deposit insurance
scheme

11.10 Number of banks closed in last 5 years 0

11.10.1 Percentage of total bank assets accounted for by
these banks

12-supervision Saudi Arabia

12.1 Bank Supervision Authority Saudi Arabian Monetary
Authority
12.1.1 Is there more than one supervisory body? no
12.2 To whom are supervisors accountable? Board of Directors appointed
by the Govt. At an institutional
level, to the Minister of
Finance

12.2.1 How is head of supervisory agency/other directors By the Royal Court and
appointed? Council of Minister
12.2.2 How is head of supervisory agency/other directors Cannot be removed until
removed? tenure is up
12.3 Any important differences between expectations from none
supervisory agency and what is mandated by law?

12.4 Total number of professional bank supervisors 70

12.4.1 Number of professional bank supervisors per 7
institution
12.5 Numbe of onsite examinations per bank in last 5 years 2

12.6 Total budget for supervision SR. 23

12.7 Frequency of onsite inspections conducted in large & one very year for specialized
medium size banks (annually=1; every two years =2) and high-risk areas of a bank;
two every year for all banks

12.8 Average tenure of a supervisor (years) 7.5

12.9 frequency of supervisors employed by banking industry 2
subsequent to retirement (never=0, rarely=1, occasionally=2;
frequently=3)
12.10 Must infraction of any prudential regulation found by a yes
supervisor be reported?
12.11 Any mandatory actions in these cases? yes
12.12 Who authorizes exceptions to such actions? No exceptions
12.13 Number of exceptions granted last year 0
12.14 Are supervisors legally liable for their actions? yes