Saudi bank chief blames self-regulation for crisis

Saudi central bank chief Mohammad al-Jasser on Tuesday blamed an ideology of self-regulation in the banking sector for the global economic crisis and called for comprehensive policing of banks.

"The current crisis has shown beyond any doubt that self-regulation is no regulation, just as self-recommendation is no recommendation," Jasser, governor of the Saudi Arabian Monetary Agency, said.

"Some major advanced economies had ... an ideological belief that markets are self-regulating and self-repairing," he said at a Euromoney Saudi Arabia Conference in Riyadh.

"It is high time that we dropped the ideologies and theoretical constructs that led us astray and enacted .... comprehensive regulation to prevent the excesses that were the root cause of the problem we are in today," said Jasser.

SAMA has maintained high capital ratio requirements for the banks, giving them a greater cushion against downturns, but the industry is also less-developed than in other countries.

Jasser credited tough regulation with the stable position of Saudi banks even as those elsewhere had stumbled if not failed. "While we supported decontrol, we never followed the push for banking deregulation too far," he said.

No Saudi bank has failed, though the central bank has had to make liquidity available to them in the toughest stretches of the crisis.

The current crisis has shown beyond any doubt that self-regulation is no regulation, just as self-recommendation is no recommendation

Mohammad al-Jasser, Saudi Arabian Monetary Agency

Last week experts at the Saudi International Banking and Investment conference predicted Saudi banks would be among the first to “bounce back” once a recovery to global crisis gets underway.

The chief economist of NCB Capital, the investment banking arm of Saudi Arabia's largest bank, said Saudi banks were healthy and well-positioned though foreign investment had lessened.

“Every economic crisis comes with an opportunity, which should be utilized to help the process of recovery,” Jarmo Kotilaine was quoted as saying by the Middle East Financial Network.

Every economic crisis comes with an opportunity, which should be utilized to help the process of recovery

Jarmo Kotilaine, NCB Capital