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Arab Banks Maintain Capital Adequacy at Minimum Levels

The meeting of the governors of Arab central banks and monetary institutions kicked off in Jeddah on Sunday. (Photo: Ghazi Mahdi)
The meeting of the governors of Arab central banks and monetary institutions kicked off in Jeddah on Sunday. (Photo: Ghazi Mahdi)
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Arab Banks Maintain Capital Adequacy at Minimum Levels

The meeting of the governors of Arab central banks and monetary institutions kicked off in Jeddah on Sunday. (Photo: Ghazi Mahdi)
The meeting of the governors of Arab central banks and monetary institutions kicked off in Jeddah on Sunday. (Photo: Ghazi Mahdi)

Governors of Arab central banks and monetary institutions announced that central banks in the region have maintained capital and liquidity adequacy above the minimum limits established in the Basel Agreement, noting that the total debt in the sector exceeded $756 billion.

For his part, the Governor of the Saudi Central Bank, Dr. Fahd Al-Mubarak, said that inflation levels in his country were still within reasonable levels, pointing to the strength of the Saudi economy in light of the current challenges.

Saudi Central Bank (SAMA)

Al-Mubarak said that estimates for the second quarter of 2022 point to a real GDP growth of 11.8 percent on an annual basis, adding that inflation levels in the Kingdom were still within acceptable rates, registering an annual increase of 3 percent in July 2022.

Regarding the labor sector, Al-Mubarak said that the general unemployment rate continued to decline to 6.0 percent in the first quarter of 2022, while the unemployment rate for Saudis also decreased, reaching 10.1 percent in the same period.

An important phase

Addressing the 46th session of the Board of Governors of Central Banks and Arab Monetary Institutions, Al-Mubarak said that the latest expectations of the International Monetary Fund (IMF) indicated a slowdown in the pace of global economic growth in 2022 to reach 3.2 percent, compared to the Fund’s expectations last April of 3.6 percent.

This was mainly due to changes in interest rates, high inflation and fluctuations in the global economy, as well as the challenges faced by emerging economies, according to the governor of SAMA.

He underlined the need for Arab countries to study all possible measures to address these challenges, coordinate efforts, and implement economic plans and reforms to achieve economic sustainability.

Capital adequacy

In a related context, the central banks in the Arab region have maintained capital adequacy, above the minimum limits established by the Basel decisions, according to Dr. Abdulrahman Al-Hamidy, Director General and Chairman of the Board of Directors of the Arab Monetary Fund.

Al-Hamidy added that the average capital adequacy ratio for the banking sector in the Arab countries amounted to about 17.8 percent by the end of 2021, while the ratio of liquid assets to the total assets of this sector reached about 32.7 percent at during the same period.

Growth of economies

Al-Hamidy said that Arab economies were expected to register a 5.4 percent growth, compared to 3.5 percent recorded in 2021.

He also expected that the inflation rate in the Arab countries as a group would reach 7.6 and 7.1 in 2022 and 2023, respectively.

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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo

European Central Bank President Christine Lagarde renewed her call for economic integration across Europe on Friday, arguing that intensifying global trade tensions and a growing technology gap with the United States create fresh urgency for action.
US President-elect Donald Trump has promised to impose tariffs on most if not all imports and said Europe would pay a heavy price for having run a large trade surplus with the US for decades.
"The geopolitical environment has also become less favorable, with growing threats to free trade from all corners of the world," Lagarde said in a speech, without directly referring to Trump.
"The urgency to integrate our capital markets has risen."
While Europe has made some progress, EU members tend to water down most proposals to protect vested national interests to the detriment of the bloc as a whole, Reuters quoted Lagarde as saying.
But this is taking hundreds of billions if not trillions of euros out of the economy as households are holding 11.5 trillion euros in cash and deposits, and much of this is not making its way to the firms that need the funding.
"If EU households were to align their deposit-to-financial assets ratio with that of US households, a stock of up to 8 trillion euros could be redirected into long-term, market-based investments – or a flow of around 350 billion euros annually," Lagarde said.
When the cash actually enters the capital market, it often stays within national borders or leaves for the US in hope of better returns, Lagarde added.
Europe therefore needs to reduce the cost of investing in capital markets and must make the regulatory regime easier for cash to flow to places where it is needed the most.
A solution might be to create an EU-wide regulatory regime on top of the 27 national rules and certain issuers could then opt into this framework.
"To bypass the cumbersome process of regulatory harmonization, we could envisage a 28th regime for issuers of securities," Lagarde said. "They would benefit from a unified corporate and securities law, facilitating cross-border placement, holding and settlement."
Still, that would not solve the problem that few innovative companies set up shop in Europe, partly due to the lack of funding. So Europe must make it easier for investment to flow into venture capital and for banks to fund startups, she said.