RIYADH — The economic and financial systems in Saudi Arabia has seen a sea change since the emergence of coronavirus (COVID-19), with a high level of professionalism displayed in dealing with local and global developments in an attempt to maintain the stability and sustainability of the economy.

Through successive and precise steps the Saudi Arabian Monetary Authority (SAMA), in cooperation with the initiatives of the financial sector, in general, and banks and insurance companies, in particular, managed to paint a beautiful picture of social responsibility toward the community and the national economy.

SAMA issued several decisions in order to preserve the stability of the economy and markets and mitigate the impact of this pandemic. The decisions contribute to enhancing the durability of the economy and prove its flexibility and financial solvency, and protect the components of the national economy including major companies, medium and small companies down to emerging projects.

These emerging projects, if affected by those consequences, would have seen many of them leaving the market and the consequences would have been disastrous for the society. This includes decisions concerning individuals dealing with the financial system, which contribute to maintaining the integrity of their dealings, and protecting them from the impact of this crisis.

In this report, we review these decisions:

SAMA presented a package of initiatives, worth SR50 billion, in addition to issuing fundamental decisions:

First: Supporting the financing of small and medium enterprises. This program consists of three basic elements aimed at reducing the burdens of fluctuating cash flow and to support working capital for this sector in order to enable growth during the coming days and maintain the continuity of employment, as follows:

Deferred Payments Program: Deposing an amount of SR30 billion in favor of banks and financing companies, in exchange for delaying the collection of their dues from small and medium enterprises for a period of six months from its date.

Funding for lending program: Depositing an amount of SR13.2 billion soft finance for small and medium enterprises by granting loans through banks and financing companies.

Loan Guarantee Program: SAMA incurred the fees of ‘Kafaalat’ issued by the Guarantee program to the amount of SR6 billion for the benefit of banks and financing companies. This is to exempt small and medium enterprises from costs of the loan financing Kafaalat in order to contribute to reducing lending cost for those facilities and to support the expansion of financing.

Second: Supporting the fees of POS transactions and e-commerce:

SAMA incurred the fees of the points of sale (POS) and e-commerce transactions at an amount of SR80 million, as fees for payments to all stores and private sector facilities on their behalf by paying them to the payment service providers participating in the national system for a period of 3 months.

Third: Regarding establishments affected by the precautionary measures that were adopted in the cities of Makkah and Madinah; SAMA coordinated with banks and financing companies to facilitate payments related to financing these facilities.

Fourth: SAMA directed the banks and financing parties to restructure current financing contracts without any additional costs or fees, so that companies can continue paying the salaries of their employees and workers in light of this crisis.

Fifth: SAMA requested providing the financing needs, such as facilitated interim loans for a period of at least 6 months. This is to contribute to the payment of employee salaries at enterprises affected by the spread of the coronavirus. To that end, it is necessary to provide SAMA urgently with the approved plans of the bank to support its customers from those facilities to maintain their employment levels.

Regarding Individual initiatives, SAMA requested banks to ensure the availability of the necessary operational support to ensure the continuity of payment systems and financial inclusion by making all channels available to customers.

This is including raising the POS purchase limit and free financial transfers between banks operating in the Kingdom in Saudi riyals through (SARIE) system for individuals and companies. Additionally, SAMA obligated companies operating in the insurance sector to provide all electronic channels to serve customers’ needs from issuing and renewing insurance documents, receiving and settling claims electronically, and receiving various requests and inquiries from customers.

SAMA also obligated the financial institutions to place a maximum number of clients who are served at the same time in the operating branches during this period, taking into account adequate spaces between customers in the waiting rooms as well as between the employees of financial institutions and customers, while adhering to the necessary precautionary measures directed by the Ministry of Health.

SAMA also issued a decision to raise the limit allowed for payments via bank cards through POS (mada atheer) to the amount of SR300, without the need to enter the passcode number in cooperation between banks and payment service providers with Saudi payments. This decision aims to reduce the number of opportunities for customers to contact POS devices, which limits the spread of the virus.

In addition, SAMA issues a decision to raise the transfer limit for digital wallets to SR20,000 instead of SR10,000, to contribute to the digital transformation in line with the needs of customers during this crisis.

SAMA directed banks and finance companies to postpone the installments for a period of six months without interest or additional costs, for those affected by losing their jobs during this crisis, including the following decisions:

1. Exempting all bank clients from any fees for conducting banking operations through electronic channels and other fees for a period of six months, and also exempting the fees for activating any services again during that period.

2. All customers are exempted from the low balance fees for the minimum period of six months.

3. Exempting all clients from any fees imposed on refinancing operations or terminating existing agreements for a period of six months.

4. Review and re-evaluate interest rates and other fees on credit cards, in line with the current low interest rates, and rationally recalculate the interest rate.

5. Return foreign currency exchange fee to clients who used bank or credit cards to pay for their travel and accommodation reservations abroad whom circumstances forced them to cancel their reservations.

6. SAMA has taken all preventive and precautionary measures to deal with the currency in times of virus spread, by isolating incoming currencies from abroad to SAMA’s branches through banks and money transfer companies in order to prevent the spread of the virus among traders.

7. Activating the business continuity plan to ensure that payment system services are not interrupted and the financial and banking systems continue to operate without affecting the quality of the services provided.

This is including ensuring that services continue to be provided through electronic channels, in addition to educating customers about all available channels for online and remote communication in order to preserve their safety, as well call centers have been activated to receive various requests and inquiries of customers continuously.

SAMA continued to issue its fundamental decisions; it approved the postponement of the annual supervisory visits, audits and internal evaluations of the capital adequacy for the year 2020, to support banks at the present time to focus on providing the best services to their clients.

The supervisory and inspection visits to finance companies were also postponed until further notice, in support of the finance companies at the present time, and to help them focus on carrying out their work during the current circumstances. Moreover, SAMA postponed the delivery of the annual data to the finance companies with the updated forms, certified by the external auditor from the date of April 4 until May 7.

In addition, SAMA postponed the issuance and application of some policies, including, the final instructions related to the methodology for calculating allocations for banks operating in the Kingdom, which was scheduled to be announced in the first quarter of 2020, and postponed the implementation of Basel III reform procedures, which were to be implemented on Jan. 1, 2022 to a time to be determined later in coordination with the relevant central banks.

SAMA also postponed field inspection activities to companies operating in the insurance sector, and alternatively focusing on remote examination programs to verify the efficiency of the companies' operations, the claims settlement mechanism and the quality of services provided to the beneficiaries of insurance coverage.

SAMA, temporarily, eased the regulatory requirements for companies operating in the insurance sector to launch electronic applications, and extended the deadline for submitting some supervisory data and precautionary reports.

SAMA has approved banks and finance companies operating in the Kingdom for several procedures related to accounting treatment for some operations. This includes the commitment to include the expected impact of the corona crisis in the financial reports in accordance with the Ninth International Financial Reporting Standard (IFRS9), while ensuring that these expectations are logical and in coordination with external auditors, and taking into account the support programs provided by SAMA.

For clients — who have benefited from the support of SAMA — banks should not count customers who wish to postpone their payments for six months as late receivables or classify them as restructured loans.

SAMA has dealt with foreign banks operating in the Kingdom similarly, postponing the issued instructions, which were to be implemented starting from April 1 to Oct. 1.

Regarding Financial Sector Entities Contributions, the observer of the current situation can note that the Saudi banks and financial sector institutions are in continuous harmony with the central bank’s trends, understanding its pivotal and societal role to cooperate in overcoming this crisis.

Commendably, banks and financing institutions initiated a delay of 3 months installments for all public and private health workers who have credit facilities (real estate, consumer, leasing financing) starting in April, in appreciation of their strenuous efforts to preserve the health of citizens and residents, and without changing the cost of financing.

Besides, insurance companies also initiated the provision of telemedicine service using electronic applications, and extended the dispensing period of medicines for chronic diseases, in order to preserve the safety of customers.

The banks supported the Health Endowment Fund to combat the corona pandemic, which aims to enhance the role of society in supporting government efforts in health development to counter this virus, with amounts exceeding SR160 million.

Insurance companies have initiated financial support to back the efforts of the Ministry of Health and health personnel in the Kingdom, with amounts exceeding SR66 million, and the financing sector had a contribution of SR15 million. These donations, which exceeded a quarter of a billion riyals, expressed a real and effective contribution to society and a sense of realization of the burden and costs incurred by health organizations as a result of this crisis.

Finally, this flexible movement, which dealt with the crisis early in deliberate and proactive steps, will, God willing, be the best supporter of the economy of this country, and we will see its effect in enhancing the stability and durability of this influential sector for the prosperity and well-being of our precious society. — SPA