Interview: Ayman Al-Sayari, Governor, Saudi Central Bank (SAMA)
What steps has the Kingdom taken to help address the effects of global economic challenges?
AYMAN AL-SAYARI: In recent years the most pronounced economic challenge has been global inflationary pressure. Domestic inflation has remained contained due to two main factors: the fixed exchange rate policy, given its role in dampening imported inflation; and the government’s decision to cap energy prices. These steps have helped mitigate the global spillover of prices to the domestic economy.
In what ways is financial technology (fintech), including blockchain, reshaping banking services?
AL-SAYARI: Saudi Arabia aspires to become a leading global fintech centre by 2030. We view the segment as a cost-effective means of financial intermediation that supports economic growth, and Saudi Arabia is well positioned to adopt new technologies. Fintech firms have already revolutionised areas such as digital payments, lending, buy-now/ pay-later services and crowdfunding.
To support this momentum, SAMA is taking a proactive approach to regulation. This includes licensing digital banks, payment service providers, debt crowdfunding platforms and finance companies, as well as incubating new fintech firms in the regulatory sandbox. Additionally, we have enhanced existing regulations and issued new ones to accommodate emerging concepts.
Where do you see opportunities for banks to support the country’s economic diversification?
AL-SAYARI: The Saudi economy is undergoing an unprecedented transformation and diversification as part of the Vision 2030 development plan. The financial services sector plays a key role in this transition by boosting economic growth and fostering innovation. It also provides essential capital to emerging local businesses, and the infrastructure required to enable consumers and companies to pay for goods and services.
Saudi banks have an opportunity to leverage diversification initiatives, which focus on increasing non-oil revenue and boosting non-oil exports. The private sector is central to achieving these objectives, with banks supporting this change. Fostering the micro, small and medium-sized enterprises segment represents another area in which banks can contribute to the Kingdom’s economic evolution.
How have Saudi banks handled the switch from the use of the London Interbank Offered Rate (LIBOR) to alternatives?
AL-SAYARI: SAMA was a participant in international discussions on the move to risk-free rates and ensured a smooth transition for the domestic banking system. This was done by establishing working groups with banks, starting in 2019, to discuss developments and mitigation of risk. In addition, SAMA required banks to submit periodic reports on the progress made in these areas, resulting in a smooth and successful transition.
To what extent have Saudi banks embraced sustainable and responsible banking practices?
AL-SAYARI: Saudi banks have adopted sustainable and responsible banking practices, and SAMA is exploring options to encourage further adherence to environmental, social and governance (ESG) criteria. One consideration is integrating climate concerns into risk management frameworks, supported by formal guidance and supervisory activities to assist in identifying, monitoring and reporting climate and sustainability-related metrics. To this end, in April 2023 SAMA established an ESG advisory committee for banks that is focused on four important processes: risk management, taxonomy, disclosure and governance, and green finance solutions.
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