Fatima Muhammad

Saudi Gazette

 

SAUDI banks have proven to be strong, healthy and capable of tackling risks during the recent global financial crises, thanks to strong bank security measures and SAMA supervisory role, and this is expected to protect banks for some time to come said Talat Hafiz, secretary-general of the Media and Banking Awareness Committee of Saudi Banks.



Asked if the banking sector still has room for more banks in the Kingdom he said, “There is an ongoing argument between experts on this matter, yet authorities and SAMA are to take decisions in this regard.”



The Kingdom used to have nine banks. After joining the World Trade Organization in 2005 the number has increased to 24 banks — half of which are Saudi banks. According to him the number of bank branches was 1,410 in 2008 while this year these branches add up to 1,722.



Hafiz believes that the number of banks is not what should matter but rather the financial stability and ability to provide high quality and first class services and products. That is what should be focused on.



He said, a number of industrial countries used to have thousands of banks many of which closed down during the crises because of issues regarding liquidity, lack of control and overstress.



“I am not underestimating the need of banks in the future, but we should not be excited when we hear that a country has thousands of banks, many of these banks provide limited services to small communities. However, the 24 banks in the Kingdom are obliged by law to serve customers anywhere in the Kingdom,” elaborated Hafiz.



Asked about the security measures that banks in the Kingdom implement to ensure maximum protection for their customers, especially with the presence of overseas fraudulent gangs, he said, “We would like to assure customers that the Saudi financial sector applies the most updated system to best provide financial security for both information and customers.”



Saudi banks, said Hafiz, are among the “rare” banks in the world that connect with customers when they constitute a transition by sending SMS noting that a transaction has been committed. In case of any emergency, Hafiz advised, customers should contact the banks immediately to investigate into the transaction.



For further protection when using online banking services, Hafiz said banks provide another password or code to the customer through SMS to ensure that the transaction is genuine.



Another advanced technology that banks in the Kingdom have started using is issuing smart cards instead of tape cards for customers. Smart cards, said Hafiz, provides more security.



All Saudi banks, added Hafiz, are in full compliance with Payment Card Industry Data Security Standard. They have been granted such certifications and accreditations and are using them to protect bank and customers information.



Among their efforts to ensure customer security the Media and Banking Awareness Committee of Saudi Banks launched in 2009 an annual national campaign to increase awareness among the public about banking security.



The anti-financial fraud campaign entitled “Do not disclose it!” was initiated after finding out that “most of the fraud-related transaction are a result of revealing financial and personal information to strangers who in turn abuse such information,” explained Hafiz.



This campaign became necessary after noting “a huge transformation in customer behavior” as they have shifted during the past few years from using traditional banking methods to e-banking services.



The number of e-banking transactions has grown by 53%. The number of operations was 871 millions while now they have reached 1.3 billion transactions. The number of ATMs in the Kingdom has increased by 49%. The number of ATMs in 2008 was 8,893, however there are now 13,231 ATMs around the Kingdom. The number of ATM cards has grown from 12.3 million in 2008 to over 17 million cards this year.



ATM cash withdrawal increased by 63%. It was SR379 billion in 2008 while last year it was SR625 billion. The number of point of sales has increased from 72,000 in 2008 to 99.4% last year. The transactions at point of sales have grown from generating SR51 billion to SR222 billion by the end of last year.



Hafiz said assets of banks have grown by 38.8% from 2008 to the second quarter of 2013. The total assets value in 2008 adds up to SR1.3 billion by the end of the second quarter of 2013 the number reached SR1.8 billion.



Hafiz also noted that a “huge increase” of customer deposit was also marked between the year 2008 and 2013. The increase is anticipated at 57% between 2008 and the second quarter of 2013. The total value of deposit in 2008 was SR847 billion while in 2013 it added up to SR1.3 billion.



Hafiz stated that what is more important is the cumulative capital of Saudi banks which has “grown significantly” between the recession year 2008 and the second quarter of this year 2013. This growth has hit 55%. The value was SR161.7 billion while it reached this year SR250.7 billion.



Corporate and retail loans have as well increased between 2008 and 2013. Figures show 40% increase. In 2008 the loans amounted to SR734.5 billions while this year it adds up to SR1.1 billion.



Saudi banks said Hafiz are in full compliance with Basel I and II accords especially when it comes to capital adequacy requirement, however, according to him, Basel III accord will take some time to be fully implemented in the Kingdom by 2019.



What makes banks in the Kingdom strong said Hafiz is SAMA’s control, which at the same time gives space for banks to “proceed in their commercial operations, expansions, growth, and provide any services within boundaries that keep them away from uncalculated risks.”



SAMA, added Hafiz, makes sure that there is enough liquidity in the system so banks can function normally. SAMA also plays a major role in making banks to separate commercial from investment operations.



According to Hafiz such separation was essential to protect the banking sector. He elaborated, “The major economic crisis that took place years back was due to mixing commercial and investment operations, therefor SAMA ordered banks to separate these operations and manage them separately.”



So far banks in the Kingdom “have scored a good result, improved and grew. This will continue, thanks to banks strong management teams and SAMA regulations,” said Hafiz.