Cabinet lauds royal support for Saudi Bank for Credit, stresses control on financial sector

No Saudi bank suffers liquidity problems - SAMA

Kuwait parliament okays bank deposit guarantees

British oil summit downgraded to ministerial meeting

Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz chaired the Cabinet's session held on Monday afternoon at al-Yamama Palace in Riyadh.

At the outset of the session, the Custodian of the Two Holy Mosques briefed the cabinet on the talks, meetings and consultations he held last week with a number of State leaders, their envoys and representatives of world organizations on the bilateral relations, issues of the region, world affairs and the consequences of the world financial crisis.

In a statement to Saudi Press Agency following the session, Minister of Culture and Information Iyad Madani said in this context, the Cabinet commended the results of the extraordinary meeting of the finance ministers and governors of monetary agencies and central banks of the Gulf Cooperation Council which was held and stressed the strength of the GCC countries' economies and their continued growth as well as the strength and stability of the banking system which enables them to deal with the possible effects of the international financial crisis. The Cabinet stressed the statement's assertion on the continuation of strengthening the control capabilities of the financial sector to deal with world financial developments. The Cabinet also affirmed the importance of continuing coordination among the GCC countries to avoid and lessen any negative effects on the region due to this crisis.

The Minister of Culture and Information said the council also reviewed the results of the extraordinary conference of the OPEC organization which was held in Vienna.

The Cabinet emphasized the need for balance in the oil market for the benefit of producers and consumers and guaranteeing the continuation of investment in this vital sector for the safety and growth of the world economy. The Cabinet underlined the kingdom's concern for the stability of the oil market, saving it from severe fluctuations, meeting the need of the market and the kingdom's continued commitment to cooperate with all OPEC and non-OPEC producers and intensify dialogue with consumers for this purpose.

The Cabinet valued the directives of Custodian of the Two Holy Mosques to deposit SR10 billion in the account of the Saudi Bank for Credit and Saving to enable the bank to meet the needs of the citizens qualified for borrowing from the bank.

The Minister of Culture and Information said the Cabinet, then, listened to a report from Prince Naif bin Abdulaziz, the Interior Minister, on the fifth meeting of the interior ministers of Iraq's neighboring countries which was held in the Jordanian capital, Amman. The Cabinet stressed the kingdom’s constant support for maintaining Iraq's safety, unity, full national sovereignty and Arab Islamic identity and efforts aiming at realizing security and stability on its soil.

Then the Cabinet reviewed topics on its agenda and took the relevant decisions.

The Cabinet authorized the Minister of Interior or his deputy to discuss and sign with the Moroccan side a draft agreement on cooperation in the field of mutual recognition of driving licenses between the Government of the Kingdom of Saudi Arabia and the Government of the Kingdom of Morocco.

The Cabinet approved the memorandum of understanding on bilateral political consultations between the Ministry of Foreign Affairs of Kingdom of Saudi Arabia and the Ministry of Foreign Affairs of the Federal Republic of Germany signed in Berlin on 8-11-2007.

The major features of the Memorandum of Understanding are the following:

-Consultations shall be alternately held each year between the two countries at the level of foreign ministers, their representatives or at the level of permanent secretaries, undersecretaries or directors responsible for areas of common interest.

-The two parties shall coordinate their positions with regard to the topics under discussion at ordinary and extraordinary international conferences and hold consultations on these issues.

The Cabinet approved the memorandum of understanding between Kingdom of Saudi Arabia and the Arab Republic of Egypt on the establishment of a follow-up and political consultation committee signed in Cairo on 26-6-2007.

The major features of the Memorandum of Understanding are the following:

- A follow-up and political consultation committee shall be established at the level of foreign ministers of the two countries to consult and exchange views on various bilateral, regional and international issues.

- The two parties shall promote cooperation and political consultation and shall coordinate their positions at Arab and international arenas.

The Cabinet approved the agreement on bilateral political consultations between the Minister of Foreign Affairs of Kingdom of Saudi Arabia and the Minister for Foreign Affairs of the Republic of France signed in Riyadh on 13-1- 2008.

The major features of the agreement are the following:

- Consultations shall be alternately held in the framework of this agreement whenever necessary in the two countries at the level of foreign ministers, their deputies, high-level officials of the two ministries or directors of the fields of common interest.

- The representatives of the two countries at the Organization of the United Nations and other international organizations shall continually contact and consult each other in a spirit of constructive cooperation with regard to all issues of common concern.

Having examined the minutes of the committee formed to study and organize situations of public and private sectors of employees participating in national events abroad, the Cabinet decided the following:

-The absence of employees of educational posts and students from public and private sectors in general education, university and similar institutions of education and other training shall not exceed, during a period of one year, a total of the following terms:

A - Thirty days maximum in the Kingdom.

B - Sixty-days maximum outside the Kingdom.

The Cabinet took a number of measures organizing the yearly leaves of absence for teachers and supervisors of physical education and for civil servants from public and private sectors and the military.

The measures stated the following:

- The administrators, technicians, coaches, and referees participating in sports, cultural and social delegations are considered delegated and treated in accordance with the provisions of the delegation by General Presidency for Youth Welfare, and the Ministry of Culture and Information, or the body requested their delegation.

- In the case of women's participation in any cultural or sports or social activity, the beneficiary body shall provide accommodation and subsistence for one man of close relatives accompanying her.

The Cabinet approved the memorandum of scientific and educational cooperation between the Ministry of Higher Education of the Kingdom of Saudi Arabia and the Ministry of Sciences and Higher Education of the Republic of Poland signed in Warsaw on 25-6-2007.

The major features of the memorandum of cooperation are the following:

- Exchange of visits between officials of higher education, as well as teaching staff members and researchers for cooperation in all areas of common interest.

- Holding university cultural weeks and days in academic and educational institutions in both countries, including lectures, seminars, book fairs, etc.

The cabinet authorized the Minister of Higher Education or his deputy to sign a draft memorandum of scientific and educational cooperation between the Ministry of Higher Education of the Kingdom of Saudi Arabia and the Ministry of Education and Sciences of the Republic of Ukraine.

The Cabinet approved licensing the establishment of a stock company called Boroj Company for Cooperative Insurance.

The Cabinet approved some appointments as follows:

- Prince Mohammed bin Mansour bin Abdullah bin Jelawy Al Saud, as Administrative Advisor at the Presidency of the National Guard (rank 15),

-Awwad bin Abdulmohsen bin Abdullah Al-Awwad, as Administrative Advisor at the Presidency of the National Guard (rank 15),

-Eng. Mazen bin Abu Al-Huda bin Hamzah Khashoqji, as Director of King Abdulaziz International Airport in Jeddah at the General Authority of Civil Aviation (rank 15),

-Mohammed bin Abdulrahman bin Abdulmohsen Al-Miqren, as Director of Legal Department at the Presidency of the National Guard (rank 14),

-Eng. Saad bin Fayez bin Hanash Al-Shihri, as Mayor of Najran region at the Ministry of Municipal and Rural Affairs (rank 14),

- Mohammed bin Abdulaziz bin Ahmed Al-Rashed, as Deputy Secretary of Library at King Fahd National Library (rank 14).

The Governor of the Saudi Arabian Monetary Agency (SAMA) Hamad bin Saud Al-Sayyari said the Kingdom of Saudi Arabia's economic activity continues to grow in accordance with 40 indicators of economic activity, emphasizing confidence in local banks and revealed that bank deposits in SAMA increased by more than SR25 billion and that government spending this year soared by 19 percent compared with last year.

In a press conference in Riyadh on Saturday to shed light on the economic, financial and monetary current global developments, Al-Sayyari described the financial situation in the Kingdom as generally good.

SAMA monitors more than 40 indicators of economic activities which show steady performance and continuous growth as we expect that growth this year will be good and that this trend will proceed for next year, he said.

He added that no further change in the exchange rate of the Riyal against the U.S. dollar, confirming the firmness of the situations of local banks.

"Not a single Saudi bank suffers liquidity or insolvency problems. Today, the information on the third quarter performance will be presented on SAMA's Web site, with figures illustrating in detail the conditions of the banking system", he said.

He ruled out that there is a tendency of merger among Saudi banks as they don't incur problems necessitating such a move.

He cited indicators of investment, government spending, consumer spending and private investment spending as examples of growing indicators, saying that government spending increased by 19 percent than last year, representing a strong incentive for economic growth.

He cast light on the strict monitoring and control system on the local banks in the Kingdom, describing it among the most internationally recognized procedures both in terms of ensuring the safety of assets and adequacy of capital or liquidity, as well as good governance of companies and banks.

"Sometimes we are blamed as conservatives. We recognize that we are so, in terms of controlling procedures. However, the significance of conservative measures is shown in need", he said, citing the current financial situation in the world.

He confirmed that the banking control auditing system is being discussed internationally as an important aspect of the safety situation in banks.

Liquidity is largely available in the Saudi banking market, he said, citing an increase in competition to attract interests over the last two weeks, leading to a dramatic increase in interest rates on deposits. He said this prompted SAMA to pump additional liquidity worth $3 billion while bank deposits in SAMA amounted to more than SR25 billion.

The explanation for that arose from the strong demand for borrowing, he said, adding that borrowing in the local market increased 37 percent during the past nine months compared to 11 percent during the nine months of last year, demonstrating the strength of domestic activity and investment.

He said that some investors who are used to borrow from foreign markets have faced difficulties by the lack of global liquidity in the financial markets, forcing them to demand liquidity from the local market.

He categorically denied that there is shortage of liquidity in Saudi banks or deterioration of its market.

The Governor of SAMA noted that the Supreme Economic Council had studied the situation within its monitor for the world financial crisis and was reassured on the strength of the banking system, the safety of local conditions and the continued local economic growth.

He reassured that not a single bank suffers any kind of problem in terms of liquidity or credit problems.

I wish to point out that the problems in global real estate markets began more than a year and a half and, since then, SAMA was studying the situation to cover any exposure of any bank that might suffer from the phenomenon, he added.

Asked to comment on the situation of the Kuwait-based Gulf Bank and its impact on Saudi banks, he said the local situation is excellent and we always watch and follow the conditions of local banks in detail.

On consumer loans, he said they grew by one per cent last year as a result of the actions of control instructed by SAMA to avoid problems between banks and borrowers.

On SAMA's monetary policy, Al-Sayyari said the institution continuously monitors liquidity and currently it monitors it on daily basis so that an appropriate measure could be taken if deemed necessary.

Asked to comment on the effects of the current financial foreign situation on the stock market, Al-Sayyari said if any effect, that is attributed to psychological factors.

"What I know and am sure of is that our local conditions are good and opportunities for domestic growth are strong and that government spending, which is the major engine for economic activity and foreign investors' confidence, are still good", he added.

Citing excerpts of the third quarter's report, he said that deposits from abroad exceed the assets of Saudi banks abroad, the lending against shares was much less than they were two years ago, and the contracts between the client and the bank are controlled by legal obligations.

Commenting on a question about the meeting of Economic Group 20 in which the Kingdom is soon scheduled to participate, he revealed that a meeting will be held on the 8th and 9th of November by finance ministers and central bank governors of the Member States of Group 20, in Brazil, preceding Washington summit to discuss the current crisis and restore confidence and stability to the world banking system.

He said Saudi Arabia is the only Arab country in group 20, due to its strict bank control system which the world counterparts need to get-acquainted.

On the Saudi investments abroad, he said assets are in a safe situation and conservatively being run and that "we are keen to get benefits without posing them to risks".

Among the advantages of the crisis are the global reduction of inflation, and retreat of demand for commodities, materials and equipment which have their impact on the local market.

Concluding his statement, Al-Sayyari said no fear and no withdrawal of deposits as there is high confidence in the banking situation.

He cited the Supreme Economic Council's recent report on the economic and financial situations.

He estimated growth in the non-oil sector at between 5 and 6 percent, noting IMF's expectations that growth in under developing countries will be good and that growth in the GCC countries will be better.

Al-Sayyari predicted that growth will continue for next year also.

He said control over branches of foreign banks in Saudi Arabia is the same exercised by local banks.

Nearly $1.5 trillion, or half of the world's sovereign wealth funds are owned by the six GCC states. Yet small investors in Kuwait are protesting, while others in the countries are either counting losses or fuming amid widespread concerns of a severe impact of the global financial meltdown.

This leads to the obvious question - are the Gulf states investing enough in their own economies?

Part of this massive wealth has been invested in assets in Europe and the United States - which of late has begun lobbying to get more to bail it out of the current economic mess.

Robert Kimmitt, deputy secretary of the US Department of the Treasury, is on a Gulf-wide tour to secure a chunk of this lucrative pie - which he says will help his country surmount the crisis.

His call comes a few months after the US led an attack on these funds, citing lack of transparency, saying their movements needed to be monitored. Under pressure, the International Monetary Fund recently drew up a framework for the sovereign wealth funds.

The current financial crisis has forced the US, the world's biggest economy, to launch a fund-seeking campaign in the Gulf to help it overcome the meltdown. There could be some positive response from the Gulf states, as they have been supporting them on and off.

Since the first oil boom in the 1970s, all the Gulf states have been utilizing the biggest chunk of the so-called 'petro-dollars' in infrastructure and people. The result is visible.

All the countries achieved a sea change within the span of a generation. However, recent developments have exposed certain loopholes within the economies that need to be fixed. While it's time for a reality check, it's also time to reflect on what the right priorities of the Gulf states should be.

The United States, the world's biggest economy, is aggressively seeking Gulf money to rescue its ailing financial institutions, just a few months after it had led an attack on the Gulf's sovereign wealth funds.

Collective efforts are needed to tackle the global financial crisis and Gulf countries have a key role to play in resolving it, a top American official said as he sought investment from the region in his country.

Robert Kimmitt, deputy secretary of the US Department of the Treasury, also praised sovereign wealth funds (SWFs) such as the Abu Dhabi Investment Authority (Adia) in sharp contrast to a debate in the West early this year that sought to put protectionist barriers against investments made by these organizations.

Kimmitt said the US favors "the free flow of capital, both from sovereign wealth funds and all other overseas investors."

He is meeting officials and business leaders in Saudi Arabia, Kuwait, Qatar, Iraq and the UAE, trying to encourage Arab funds to invest in the US.

Referring to the DP World debacle in 2006, when the Dubai-based port operator had to abandon efforts to manage six key American ports due to political opposition, Kimmitt clarified the US is now more open to Arab investors, who invested $7 billion in the US last year.

Kimmitt tried to address the issue again with the promise that "much has changed, and changed for the good, in the two and half years" since.

"That controversy made clear to US policymakers the importance of reconfirming our commitment to open investment and of taking proactive steps to respond to the lessons learnt," he said in his remarks at the Dubai International Financial Centre (DIFC).

Acknowledging that inadequate regulation of the US financial system has created the current market meltdown, he underlined the global nature of the crisis.

"It has become evident that the turmoil is not isolated to the United States and Europe, but has ramifications for all countries, including in the Gulf. Our capital markets are more integrated than ever before, allowing opportunities, but also financial difficulties, to spread rapidly across borders," he told a gathering of officials, potential investors and the media.

"Collectively, we need to rebuild confidence in our markets so that capital can flow again to help spur global growth," Kimmitt added.

It remains to be seen how Gulf investors will respond to these calls while uncertainties prevail. DIFC governor Omar Bin Suleiman told reporters funds in the region are "trying to understand whether it [crisis] has reached bottom."

While the US struggles to overcome the paralysis in its financial system, Washington appears intent to maintain the pressure on Tehran over its controversial nuclear program.

Robert Kimmitt, deputy secretary of the US Department of the Treasury, called for curbing business links with Iran, echoing similar calls in the past by visiting US officials.

"Enhanced vigilance over all business with Iran is necessary as we have seen Iran abuse its access to financial and commercial markets in order to further its proliferation efforts," the US official said, noting that "protecting the integrity and reputation of a country's financial system is especially difficult when business is done with Iran."

Asked for a response by reporters, DIFC governor Omar Bin Suleiman said the DIFC and UAE respect UN resolutions whether they refer to Iran or others.

The Central Bank of the State of Kuwait brought down the discount rate from 4.5 to 4.25 percent as of today, the CBK governor told KUNA.

Sheikh Salem Abdelaziz Al-Sabah said the board's decision came in view of close follow up of local and international monetary, financial, and banking conditions.

This is an effort to boost trust in the national economy and to boost the role of the banking system in serving the financing needs of the local economy's sectors, he said.

-- The governor added the bank is closely watching developments and "would not hesitate to take all due measures and precautions to guarantee stability of the national economy and the integrity of the local banking system." The discount rate is a focal price that determines maximums of local interest margins on lendings in the Kuwaiti currency.

This means that a discount rate cut translates into a down in maximum interest rates locally by the same amount among local banking and monetary units.

The chairman of troubled Kuwaiti lender Gulf Bank has quit, state news agency KUNA said on Tuesday, after the central bank stepped in to support the lender hit by currency deal losses.

"The resignation of Chairman Bassam Al Ghanim was officially accepted," KUNA said, quoting a bank statement.

Meanwhile, Deputy Prime Minister and Minister of State for Cabinet Affairs Faisal Al-Hajji said in a statement after the parliament session that the assembly approval of the bill "affirms all parties' concern at what is happening at the local and international markets and proves that our authorities rise up to the challenges when warranted." He praised the fruitful cooperation between the legislative and executive authorities, and affirmed that the decision would lead to positive results on the domestic financial and economic conditions.

The estimated total loss of world financial institutions has reached 1.8 trillion pounds (2.8 trillion U.S. dollars) amid the unfolding crisis, Britain's central bank said Tuesday in its biannual Financial Stability report.

The instability of the global financial system in recent weeks has been the most severe in living memory, said John Gieve, deputy governor of the Bank of England.

"With a global economic downturn underway, the financial system remains under strain ... but it is better placed as a result of the exceptional package of capital, guaranteed funding and liquidity support," said Gieve.

According to the report, rescue measures taken by many governments have so far worked well in bolstering confidence in the banking system.

However, the deputy bank governor said a "fundamental re-think of how to manage systemic risk internationally" is needed to ward off future failures.

Russia and China on Tuesday signed a long-awaited deal to build an oil pipeline from Siberia to China after talks between Prime Minister Wen Jiabao and Russian counterpart Vladimir Putin.

The leaders watched as Chinese state energy major CNPC and Russian state pipeline monopoly Transneft signed the deal to build the pipeline from the Siberian town of Skovorodino to the Chinese border.

The pipeline agreed on Tuesday would have a capacity of 15 million tons of oil per year and would be a branch of the main East Siberia-Pacific Ocean trunk pipeline, which is still under construction, officials said.

"We should deepen cooperation in the energy sphere. Long-term cooperation will help economic development and stability on world markets," Wen said at the opening of a Russia-China business conference with Putin in Moscow.

During his visit, Wen also said that Russia and China could help boost global economic stability through greater cooperation.

"Russia and China are growing economies with major influence in the world... They can help strengthen the world economy," Wen told investors in Moscow.

"We should strengthen ties, look together at anti-crisis measures and coordinate macroeconomic policy," he added.

Prime Minister Gordon Brown embarks on a mini-tour of oil-rich Gulf states Saturday, but could struggle to win support for his plan to boost funds available to nations hit by global economic chaos.

Brown will head to Saudi Arabia, the United Arab Emirates and Qatar in a four-day visit and is likely argue to that Gulf states should be among the biggest donors to an expanded International Monetary Fund (IMF) bailout scheme.

"It's the countries that have got substantial reserves, the oil-rich countries and others who are going to be the biggest contributors to this fund," Brown said before the trip, adding he also wanted China to contribute.

"I am going to the Gulf at the weekend and it is one of the items that will be in the discussions with all the international leaders."

But the Organization of Petroleum Exporting Countries (OPEC), whose top producer is Saudi Arabia and which counts the UAE and Qatar as members, says it sees no reason its members should bail out a crisis which originated in the US.

And experts say that even if Gulf states do step in to bail out countries hit by the downturn, they would probably not want to do it through the IMF.

The Third Sino-Russian economic forum opened in Moscow Tuesday, and Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin addressed the opening ceremony.

Putin said that the Russia-China economic cooperation is based on common interests and has reached an unprecedented high level, which will also benefit the two peoples.

He suggested the two countries to further cooperation in the fields of trade, investment, machinery and electric products, energy, science and innovation, agriculture and infrastructural construction.

Sino-Russian trade volume surged by 23 percent year on year in the first nine months of this year to hit $43 billion, according to Chinese official figures. The two countries set the trade target of 60 to $80 billion in 2010.