Sama sees no problems for the banks
“These people aren’t really rich,” the manager at one office tells Euromoney, “their net worth might be as little as $5 million to $10 million.
Muhammad Al-Jasser, vice governor of the Saudi Arabian Monetary Agency, must be glad he doesn’t have to worry about the stock market and its recent fall except to the extent that it might have an effect on the banking system. Apparently he has been sleeping soundly. “The banking system is not facing any systemic risk as a result of the events in the stock market,” Al-Jasser tells Euromoney.
The Saudi banks have been heavily involved in the stock market boom both as providers of the retail technology to enable mass participation – Sama prodded them into this – and as lenders to stock market investors. Riyadh banking circles are awash with, possibly apocryphal, stories of retail customers buying goods such as cars with consumer loans from the banks, immediately selling them and stuffing the cash into the stock market as it boomed earlier this year. Now it has crashed.
Consumer lending is well-regulated and limited to debt service at a maximum of one third of salary. If customers are borrowing to invest in the stock market, collateral has to be 200% of loan value and they have to release shares to the banks.