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Saudi banks not threatened by Saad fiasco

Saudi banks not threatened by Saad fiasco

The governor of Saudi Arabia Monetary Agency (SAMA) said that Saad and Algosaibi Groups’ $22 billion debt poses no threat to the nation’s banking system. What?

September 2, 2009 10:10 by

Muhammad Al-Jasser, governor of Saudi Arabian Monetary Agency (SAMA), said Tuesday that the debts of business conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros did not pose any major threat to Saudi banks.

“There is no systemic risk on the Saudi banking system from the debts of these two firms. Profitability, however, could be affected,” Al-Jasser told reporters.

Saad and Algosaibi are embroiled in a legal battle in the United States after defaulting on debts, with some bankers warning the total cost of write-downs may hit $22 billion and affect around 120 banks.

The comments are Al-Jasser’s first on the issue since the two groups’ problems came to light in late May when SAMA froze the accounts of Saad’s Chairman Maan Al-Sanea, a decision that he has never confirmed or commented upon.

“The government has taken a decision since these two firms may affect the business sector in the Kingdom, and its reputation and position,” Al-Jasser said. “The government has set up a special committee to look into the two firms, follow the situation of these two firms and take appropriate action.”

The committee is submitting its reports to “the higher authorities in the government,” he added.

He did not provide any additional information.

“These two firms are family-owned, they are not banks licensed by the central bank or the Capital Market Authority. So it is not up to us to deal with the issue of these two firms,” Al-Jasser added. Algosaibi is suing Al-Sanea for fraud in a case involving allegations of $10 billion in loan irregularities.

“Within the Kingdom, we have not noticed any financial irregularities. We are not responsible for what happens outside the Kingdom,” Al-Jasser said.

The SAMA governor said he expected “a minor decrease” in profits of Saudi banks in the third quarter of this year.

Arab News

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