Dani Okaz/Saudi Gazette TAIF/JEDDAH – The Saudi Arabian Monetary Agency (SAMA) is investigating local banks for tampering with the terms of Saudis' personal loan contracts. Banks which debited accounts separate from those agreed on when the loan contract was signed are being investigated, according to an official source at SAMA. SAMA will not allow violations by banks, whether they are regarding personal loans or otherwise, the source said. SAMA has also forced a bank to return SR1 million to Saudi citizens who were victims of a bank hacking operation. The decision to return the money was made by the Banking Disputes Committee when it was found that the bank had not provided the citizens' accounts with the necessary security measures. Meanwhile, the Commission for Information Technology and Communication (CITC) paid secret visits to check if banks were implementing the required directives and controls. The CITC is expected to soon establish centers that provide government authorities with periodic information on hackers and hacking attempts. The International Monetary Fund (IMF) has urged Saudi Arabia to “complement recent strides in banks' risk management by an improved (regulatory and supervisory) regime for large exposures of banks to connected parties.” In its latest report on the Kingdom titled “Saudi Arabia: Financial System Stability Assessment—Update” which was published Wednesday, the IMF urges the Saudi Arabian Monetary Agency (SAMA) to pay far more attention to individual large exposures of Saudi banks to major corporates especially during onsite inspections in a system what the Fund says is characterized by high single-name concentration. “The possibility for SAMA to allow large exposures of as much as 50 percent of capital, which was recently used (one large exposure stands at 38 percent of capital), should also be removed,” said the IMF. It recommended a range of actions to be taken by SAMA. These include: i) capping large exposures of Saudi banks at 25 percent of capital; ii) strengthening the definition of related parties needs to ensure that close family relationships are taken into account; iii) the issuing by SAMA of a framework circular aimed at bringing all aspects of risk management into one document; iv) and updating requirements on market risk and internal controls to reflect developments in the last decade. The recommendations effectively have arisen from an IMF study conducted in 2011 and are based largely on the issues relating to the widespread bank losses caused by the 2009 failure of two large well-established family groups in the Kingdom. This suggests that there may have been weaknesses in the credit risk management of the banks. The report in general is positive about the Saudi Government's and SAMA's management of the Kingdom's economy and financial sector. “SAMA proactively responded to the (above) defaults, including by ensuring that losses were fully provisioned and by spearheading dialogue with the banking industry to identify relevant lessons.” __
