Saudi banks are poised to increase their capital on the back of massive growth in deposits that reached a record $344 billion (SR1.29 trillion) in 2013, local media quoting data released by SAMA (Saudi Arabian Monetary Agency).
According to the SAMA report, the volume of deposits in local currency in the first quarter of 2013 rose by 2.5 percent to hit SR31.2 billion whereas deposits in hard (foreign) currency dropped by 4.6 percent to SR7.4 billion.
The number of Saudi commercial, including foreign, banks jumped to 23 by the end of 2012 whereas their branches Kingdom-wide stood at 1,696 by the end of the year, the report said.
The Riyadh Region had the biggest number of bank branches by the end of 2012 at 506, or 29.8 percent of total operational banks kingdom-wide, followed by Makkah Region at 384 branches (22.6 percent), the Eastern Region at 320 (18.9 percent), Qasim and Asir Regions at 107 (6.3 percent for each), and Madinah Region at 78 (4.6 percent), the report said.
As a result of the financial crisis in 2007 and depreciation of capitals in a number of global banks, the Basel Committee on Banking Supervision issued Basel II, 2.5 and III, the report said.
Basel accords are reportedly meant to create an international standard for banking regulators to control how much capital banks need to put aside to guard against the types of financial and operational risks banks (and the whole economy) may face.
Commenting on the possible increase of Saudi banks’ capitals and Basel requirements, economic and financial expert Fadl Abu Ainain said Basel III accord had put the local banks at a challenge on raising their capitals complying with international standards.
With the increased volume of financial reserves, the Saudi banks are prepared to raise their capital, he said.
Profits realized by Saudi banks are sent into three directions: the first goes to shareholders (as dividends), the second kept as retained profits, and the third part remain as statutory reserves to boost future capital increases of banks, the expert said.
Riyadh Bank has recently applied for capital increase from the current SR15 billion to SR30 billion, the media said.