Evolving banking regulation and supervision: A case study of the Saudi Arabian Monetary Agency (SAMA)

Abstract

Purpose

The purpose of this paper is to analyze the effectiveness of the Saudi Arabian Monetary Agency's (SAMA's) regulatory policies.

Design/methodology/approach

Both descriptive and comparative analyses are used, especially in highlighting SAMA's monetary policies and approach during the 2008 world financial crises.

Findings

The analyzes revealed that SAMA has more than adequately met international regulatory supervision standards, but will face challenges in regulating the domestic Islamic banking sector, meeting the self‐imposed 2010 Gulf Cooperation Council (GCC) gulf monetary union under a fixed parity rate regime, developing cross border regulatory and supervisory skills, and suggests possible solutions.

Practical implications

The paper noted the role of SAMA in managing monetary policy under a fixed parity regime, its banking supervision policies, and the evolving nature of banking regulation in the face of globalization challenges, World Trade Organization (WTO) accession in 2006 and in coping with the 2008 global financial crises which could be a template for other GCC central banks. The paper highlighted the major elements and effectiveness of Saudi banking law and restrictions on Saudi banks in terms of capital adequacy, reserve requirements and financial services, and address issues such as the impact of new regulatory reforms by SAMA, and their effectiveness on monitoring and supervising Saudi banks.

Originality/value

The paper concludes that the effectiveness of SAMA's regulatory policies has withstood both domestic and international financial crises and that SAMA can play a powerful influence in the proposed GCC monetary union.

Citation

Ramady, M.A. (2009), "Evolving banking regulation and supervision: A case study of the Saudi Arabian Monetary Agency (SAMA)", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 2 No. 3, pp. 235-250. https://doi.org/10.1108/17538390910986353