The Saudi Arabian Monetary Agency, 1952 2016

APPENDIX: INSIDE SAMA

SAMA has been fashioned by the vision of its eight governors. As one orthe other of the authors has known personally every governor since thethird, Anwar Ali (who took office only six years after SAMA wasfounded),1 we thought it would be interesting to set out some accountof what each man brought to the job, our view of their major achieve-ments and in particular what they were like as human beings.

Anwar Ali (1958–74) was a roving spirit, born a British subject incolonial India and later becoming a Pakistani national before moving tothe US. He arrived in Jeddah on a temporary assignment from the IMFand fell in love with the country. He effectively re-founded SAMA andchampioned its independence. As early as 1962, he explained in SAMA’sfirst Annual Report the mechanism by which the non-oil economydepended on oil income through the multiplier process. Ali establishedthe system of financial supervision that endures to this day. He was a hardworker, and his only relaxation was playing the card game of bridge whichrequires a strong capacity for mental arithmetic and calculating odds.Ali died in office in 1974, as did his mentor, King Faysal, the followingyear. Ali relied on his secretary to translate Arabic documents into English,and SAMA’s Investment Deputyship still uses English as well as Arabic asan operational language.

When Ali died of a heart attack while visiting Washington DC, the USEmbassy in Jeddah sent Secretary of State Kissinger a fine epitaph:

© The Author(s) 2017A. Banafe, R. Macleod, The Saudi Arabian Monetary Agency,1952–2016, Financial Institutions, Reforms, and Policies in MuslimCountries, DOI 10.1007/978-3-319-55218-7

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[Anwar Ali’s] long tenure was based on two facts: his close personalrelationship with King Faisal and his ability to balance pressures fromthe Saudi royal family in a period of massive growth of Saudi finan-cial resources against the need to modernize the kingdom’s socialand other services. He was a world-class financier, highly conserva-tive in his approach to placement of Saudi surpluses which weregrowing at an unprecedented rate when he died . . .The US particu-larly and the Western world in general owe a great debt to Anwar Alifor his refusal to switch Saudi Arabian financial resources from onemarket to another for political or other reasons without due regardfor monetary effects on other nations.2

Anwar Ali’s successor, the first Saudi to fill the top job, was AbdulazizAl-Quraishi (1974–83). He was born in Al-Ahsa in the Eastern Province,where his father worked for the Ministry of Finance, and took an MBA inthe US. Before he came to the central bank, he had a number of govern-ment roles (including that of minister of state) and gained a reputation as aproblem solver. He ran the Saudi railroad system and Dammam port, andthen was appointed President of the Civil Service Bureau. In person, hewas a skilled manager of people and treated his staff in a friendly way.

Al-Quraishi certainly had enough problems to solve. His time in officespanned both oil shocks and saw a huge rise in the size of the foreignexchange reserves. He implemented within a few weeks Ali’s plan to bringin a team of Western advisers and pushed ahead with buying US Treasuriesdirect, followed by similar deals with the Japanese and Germans. He alsobegan investing in equities worldwide. Critically, in 1981, he extended thematurity of bond investments at a time when interest rates were at a post-war high and he diversified out of the dollar. These were bold and creativedecisions that were to generate big profits in the decade that followed.

His job went beyond dealing with crises and he was committed toempowering Saudis to take charge of their economy. He pushed hardfor the Saudization policy that handed the management of the banks overto local investors. His personnel skills showed when he built a housingcompound ahead of SAMA’s relocation to Riyadh, which meant that keystaff became good neighbors and family friends as well as colleagues.SAMA’s culture today owes him a lot. Al-Quraishi stepped down in1983 to join his family business, Al-Quraishi Brothers.

Hamad Al-Sayari (1983–2009) hails from Dhurma, about fifty milesfrom Riyadh, and is SAMA’s longest-serving governor, spanning the reigns

302 APPENDIX: INSIDE SAMA

of King Fahd and King Abdullah. He had a charming manner and a habit oflistening carefully to what was being said, preferring to act cautiously andexert influence behind the scenes. He had an opinion about everything, butwas a man of few words and when he spoke, he did so without affectation,simply and directly. At such moments, watching him as he twirled hisreading glasses in his hand, his audience would recall that the fifthGovernor had begun his career as a teacher.

Al-Sayari took a master’s in economics from the University ofMaryland. Before specializing in finance and economics, he gained adegree in Sharia. He shifted from a teaching job to work with the quasi-government organizations that invested public money. FollowingAl-Quraishi’s resignation in 1983, Al-Sayari moved up from ViceGovernor to the top job, as Acting Governor until his appointment asSAMA Governor in September 1985. In the 1980s, oil had slumped inprice, the government was running budget deficits and the foreign reserveswere falling fast. Al-Sayari pegged the riyal firmly to the dollar – a peg thathas endured for three decades – and handled the decline in assets adroitly.

Undoubtedly the biggest crisis that Al-Sayari had to tackle during histerm in office was the Iraqi invasion of Kuwait in 1990. It is testimony tothe caliber of the fifth Governor that his swift and effective response to thisregional catastrophe led to what was certainly SAMA’s outstanding inter-national achievement. After Al-Sayari had restored confidence in the wakeof the original panic in Riyadh, he turned SAMA into an effective sub-stitute for the Central Bank of Kuwait (then in exile) by organizing hisfellow governors in the Gulf to defend the Kuwaiti dinar exchange rateand provide whatever liquidity was needed. This violent episode wasfollowed by the long grind of the 1990s when Al-Sayari was responsiblefor handling both a foreign assets rundown and fast-rising governmentdebt. He stuck firmly to the principle that the bond market should bevoluntary, insisting that SAMA should not coerce the banks into buyingbonds.

When oil prices finally began to turn, a new and more complex set ofproblems emerged for Al-Sayari – those stemming from Saudi Arabia’sgrowing involvement in the global financial system. The 9/11 terroristattacks against US targets in 2001, the stock market crash in 2006, inflationand the start of the global financial crisis all occurred on his watch. He wasalso the first head of SAMA to grapple with the relatively new phenomenonof critical public opinion. Al-Sayari tried to manage the bubble in stocks bylimiting consumer loans; but the market collapse triggered a blame game.

APPENDIX: INSIDE SAMA 303

He found himself in a similar situation with inflation due to higher oil andfood prices, but he stood firmly against popular demand to revalue the riyaland fought a long defensive battle which kept the peg in place.

Managing matters is less challenging in affluent times, but in a difficulteconomic climate, decision makers’ skills are truly tested. Al-Sayari stoodup to that test. By the end of his term, his skill at crisis management andhis pragmatism in quietly transforming Saudi Arabia’s financial infrastruc-ture had made him an internationally respected figure – leading to himbeing awarded the title of central banker of the year for 2008 by TheBanker magazine.

Al-Sayari’s successor, Muhammad Al-Jasser (2009–11), a stickler forpunctuality, had a commanding demeanor and was active and decisive ineverything he did. A fast walker, his staff found difficulty in keeping upwith the pace he set. In discussions, Al-Jasser was a sharp talker, who,while he relished dominating the debate, was nevertheless delighted whena good point was made by somebody else. He was stern but could beutterly charming when he chose and enjoyed the complete loyalty of thosewith whom he worked closely.

Al-Jasser hails from the middle of the kingdom, Bureydah, a desert oasis200 miles north of Riyadh. He and his successor Almubarak were the firstgovernors to see as children how the oil wealth had helped to transformtheir country into a modern state. Al-Jasser’s early career was peripatetic.After completing his bachelors and master’s program in the USA, heworked at the Saudi Ministry of Finance (1981–83) and then went tothe US to get a PhD in economics (1983–86). After only two years back atthe finance ministry in Riyadh, he returned to Washington DC to becomeultimately an executive director at the IMF. Finally, at 40, he returnedpermanently and became Vice Governor of SAMA (1995–2009).Al-Jasser’s other achievements in those years included working on theGas Initiative (1997–98) and serving as a member of the Saudi negotiatingteam when the country entered the WTO.

Within four months of taking office in the middle of the global financialcrisis, Al-Jasser had to deal with the biggest corporate failure in thecountry’s history when the Saad-AHAB groups failed. He moved swiftlyto contain the problem, making sure the banks had no other problemloans. By 2010, credit growth had resumed and no Saudi banks hadcollapsed. Al-Jasser also worked hard on implementing Gulf MonetaryUnion, but he was probably well aware that politics would make it hard toachieve a common Gulf currency.


Al-Jasser made a powerful contribution to the debate about what hadgone wrong with the world’s financial system. He was not afraid to beblunt and controversial, and to explain to the media how the Saudieconomy really worked. He vehemently defended Saudi Arabia’s macro-economic policy framework, arguing strongly about the benefits of coun-tercyclicality to economic growth and the cost of the text book approachfor exchange rate management (in short, why switch certainty for uncer-tainty?). Al-Jasser had a good rapport with Al-Sayari when they were at thehelm of SAMA affairs, and this lent credibility to the central bank’sdecision making on various policy and operational issues. Al-Jasser wasin favor of transparency where appropriate, agreeing to provide the IMFwith gross figures for SAMA’s foreign exchange reserves, as they werecounted toward quota allocation. In 2010, Al-Jasser was honored with theABANA (Arab Bankers Association in North America) AchievementAward. At the end of 2011, after one thousand days in office and afterhaving piloted the banking system through the greatest world financialcrisis in seventy years, he was promoted to become Minister of Economyand Planning.

Fahad Almubarak, the next governor (2011–16), had an unconven-tional background. Unlike his six predecessors, he was neither an econo-mist nor a public servant by training, but earned his doctorate in businessadministration in the United States. He comes from the Eastern Provinceand rose to wealth and prominence in the world of Saudi finance. Afterfounding his own investment firm, he merged it into Morgan StanleySaudi Arabia, holding the positions of chairman and managing director.He later moved on to chair the Saudi Stock Exchange (Tadawul) andserved for six years on the Shura Council.

Almubarak’s appointment reflected the government’s wish to infuseprivate sector discipline and culture into the public-sector bureaucracyand he focused on mentoring and training SAMA’s staff. Almubarakoften said his aim was to move SAMA from good to great, influenced byJim Collins’ book of the same name. The seventh governor’s style was toencourage staff to interact across the central bank rather than work inseparate silos. His aims included the achievement of good time manage-ment and staff cohesiveness. Almubarak encouraged emailing for ease andspeed rather than sticking to an old-fashioned paper trail for approvals,emphasizing internal meetings and presentations with wider participation.A whirlwind of change after his appointment saw a redesign of SAMA’sorganizational structure, overall strategy, governance, risk management


mechanisms and information systems, along with a complete refining ofthe investment procedures and processes. Almubarak was a hard workerwho put in long hours and had little time for the relaxed habits of someold-timers. He liked to relax by going on long walks.

The current Governor, Ahmed Abdulkarim Alkholifey, is the eighth tohead the central bank. He succeeded Almubarak in May 2016 in a roundof senior changes in the government (which included the appointment ofMuhammad Al-Jasser as an adviser to the General Secretariat of theCabinet). In contrast to his predecessor Alkholifey is a long-time centralbanker who has served in a variety of positions at SAMA since 1995. Anative of Riyadh, he took a degree in law from King Saud University in1987 and joined the Ministry of Petroleum and Natural Resources as alegal adviser. He studied in the US, gaining a Master’s degree inEconomics in 1993 and two years later he joined SAMA as an economist.He continued his academic work and was awarded a PhD and MBA inBusiness Administration and Economics in 2000. By 2002 he had adirector-level post at SAMA and was appointed Director General ofResearch and International Affairs in 2010. The following yearAlkholifey was seconded to the IMF as an executive director, and whenhe returned to SAMA in 2013 he became a Deputy Governor.

Alkholifey served on the technical committee of the Islamic FinancialServices Board until 2015, so he is familiar with issues concerning Islamicfinance. He has also been on the board of SAGIA for some years. Underhim the Research Department started to publish academic papers onsubjects such as exchange rate policy, inflation forecasting, the outputgap in the economy, the Saudi stock market and challenges to economicdiversification. His main priority is to maintain monetary stability andmake sure that SAMA fully supports the ideas of ‘Vision 2030.’

SAMA Board of Directors 20161. Governor Dr. Ahmed Alkholifey, Chairman2. Vice Governor Abdulaziz Alfuraih, Vice Chairman3. Hamad Al-Sayari4. Abdulaziz Al-Athel5. Khalid Al-Juffali

N.B. At the time of SAMA’s creation in 1952, the Minister of Finance wasthe Chair of SAMA’s Board, and his deputy was the Vice Chair. SAMA’scharter was amended in December 1957 to emphasize its autonomy,


making the Governor and the Vice Governor the Chair and Vice Chair ofthe Board. At the same time, the Board was assigned the appropriatepowers to ensure sound management.

SAMA Senior Management at the end of 2016Governor: Dr. Ahmed Alkholifey (appointed May 2016)Vice Governor: Abdulaziz Al-Furaih, (July 2014)Deputy Governor for Investment: Ayman Alsayari (May 2013)Deputy Governor for Banking Operations: Hashem Alhekail (May 2013)Deputy Governor for Administration: Dr. Fahad Aldossari (May 2016)Deputy Governor for Research & International Affairs: Dr. FahadAlshathri (July 2016)Deputy Governor for Supervision: Ahmed Alsheikh (November 2016)

Former GovernorsFahad Almubarak 2011–16Muhammad Al-Jasser 2009–2011Hamad Al-Sayari 1983–2009Abdulaziz Al-Quraishi 1974–1983Anwar Ali 1958–1974Ralph Standish 1954–1958George Blowers 1952–1954

Former Vice GovernorsPost vacant 2013–2014Abdulrahman Al-Hamidy 2009–2013Muhammad Al-Jasser 1995–2009Ibrahim Al-Assaf July 1995–Oct 1995Ahmed Al-Malik 1988–1995Post vacant 1983–1988Hamad Al-Sayari 1980–1983Khalid Al-Gosaibi 1972–1980Junaid Bajunaid 1963–1972Abed Sheikh 1958–1963Ma’touk Hasanain 1954–1958Ralph Standish Sept 1954–Nov 1954Rasem Al-Khalidi 1952–1954


NOTES

1. The first two Governors were George A. Blowers (1952–54) and RalphStandish (1954–58).

2. From Jeddah Embassy to Secretary of State: SAMA after Anwar Ali,November 13, 1974. Canonical ID: 1974jidda06631_b. Accessed onlineat www.wikileaks.org.


http://www.wikileaks.org

GLOSSARY

Active investment management Use of human or computer skills with theaim of out-performing after fees the return on an investment benchmark.

Appreciation A gradual increase in the value of a currency in response tomarket demand rather than by an official revaluation.

Arbitrage The process of taking advantage of the existence of differentprices for the same product (or its substitute) at the same time but indifferent markets.

Basel Standards Recommendations on banking regulations to improvethe regulation, supervision and risk management of financial institu-tions issued by the Basel Committee on Banking Supervision operatingunder the auspices of the Bank for International Settlements (BIS). Inhistorical sequence they are known as Basel I, Basel II and Basel III.

Basis Point 1/100 of 1 percent i.e. 100 basis points = 1 percent.Bear Market A declining market or a period of pessimism when declines

in market prices are anticipated.Benchmark Return In investment management, performance of active

and passive fund managers is typically measured against the percentagereturn on an index of securities over the same period to see whetherthey are beating it or not. This is the return on the benchmark.

Bid Rate The price at which the quoting party is prepared to purchase acurrency or deposit.

Black Market An unlicensed market, normally illegal, in an asset orcurrency. Black market prices will normally be substantially higher


309

than official prices for the same asset, but while the asset is rationed insupply at the official rate, it is freely available on the black market.

Bond A security which shows the liability of the issuer to pay the beareror holder. It is usually a negotiable instrument with a fixed interest rateand fixed maturity date which is longer than a year.

Bretton Woods Conference A meeting of representatives of non-Communist countries in Bretton Woods, New Hampshire in 1944.The participants agreed on the characteristics of the internationalmonetary system which prevailed through 1971. This system is gener-ally known as the ‘Bretton Woods System’ and was a fixed exchangerate system with some capital controls.

Broker A broker brings buyers and sellers together for a fee for thisservice. Brokers do not take a position as principals themselves, theyonly arrange for transactions among other parties as agents.

BSDA Bankers Security Deposit Account. A now-defunct non-negoti-able instrument issued by SAMA to the banks as a way of mopping upexcess liquidity. Now replaced by Central Bank Bills.

Budget Deficit A situation in which the government budget spendsmore than it receives as revenues in the same timeframe. Also called afiscal deficit.

Budget Surplus A situation in which the government budget spends lessthan it receives as revenues in the same timeframe. Also called a fiscalsurplus.

Bull Market A rising market or a period of optimism when increases inmarket prices are anticipated.

Capital Controls The regulation of foreign exchange transactions by agovernment or central bank to avoid an excessive expansion of thelocal money supply or depletion of the country’s foreign exchangereserves. Such controls are usually imposed when a country has unde-sirably large capital inflows or outflows. Also known as ExchangeControls.

Central Bank A bank acting on behalf of a country’s government withthe right to issue the country’s currency and with responsibilities whichmay include the management of the country’s money supply, short-term interest rate levels and availability of credit. It may also manage thelevel of the country’s foreign exchange reserves and seek to control theexternal value of its currency.

Central Bank Bill A negotiable instrument, typically with a maturity ofless than a year, issued in domestic currency by the central bank to the

310 GLOSSARY

banks in the financial system. The aim is to mop up excess liquidity onissuance, and to adjust liquidity by varying the issuance size or allowingthe banks to temporarily sell the bills back (see Repurchase Facility).The Saudi version is a SAMA Bill.

Central Bank Swap The practice of central banks using foreign exchangeswaps with each other to inject or withdraw liquidity from the domesticmoney market without creating a net exchange position.

Competitive Devaluation Devaluation in excess of the estimated equili-brium rate to gain price advantages in export markets.

Collateralized Debt Obligation (CDO) A structured financial productthat pools together cash flow-generating assets and repackages this assetpool into discrete tranches carrying different risks that can be sold toinvestors. Synthetic CDOs add derivatives.

Credit Rating A measure of the riskiness of an instrument or a borrow-ing entity from the point of view of the investor not receiving interestpayments and principal in full and on time. The principal rating agen-cies are Standard and Poor’s (S&P), Moody’s and Fitch. An S&P ratingof AAA is the highest possible rating for a bond or currency, and creditquality declines as the alphabet is gone through.

Credit Risk In lending operations, the likelihood that a borrower will beunwilling or not able to repay the principal or pay the interest on time.

Currency Peg A situation where the central bank holds the foreignexchange value of a currency constant against another currency(such as the dollar). The typical arrangement is a promise by thecentral bank to buy or sell unlimited amounts of the dollar for thelocal currency.

Current Coupon (1). In fixed rate securities, a coupon rate whichapproximates the current yield to maturity level for similar securities.Straight bonds with current coupons have prices close to par (100). (2).In floating rate securities, the rate of interest on the current interestperiod.

Current Yield The ratio of a coupon on a security to its market price,expressed as a percentage (coupon/price x100).

Debt Service Payments of interest and principal on total borrowingswhich must be made by the borrower in the period during which itsdebt is outstanding. A debt service ratio compares these payments tosome other number (e.g. exports in the case of a sovereign borrower inforeign currencies, or to GDP in the case of a sovereign borrower in itsown currency).

GLOSSARY 311

Depreciation A gradual decline in the value of a currency in response totrends in demand and supply rather than by an official devaluation.

Developed Market A developed country, in which investment would beexpected to achieve lower returns than in an emerging market butaccompanied by lower risk. The United States and United Kingdomare developed markets.

Dollarization The process by which the money supply in a countrycomes to consist of a mixture of local currency and foreign currency(typically, dollars) because economic participants in the country prefernot to take the risk of devaluation of the local currency. In an extremesituation, the dollars are used exclusively.

Duration Dependence Positive duration dependence is when the like-lihood of an event is more likely given the passage of time. Negativeduration dependence is when the event is less likely given the passage oftime. No duration dependence is when the likelihood of an event isindependent of the passage of time. See also Random Walk.

Duration-Neutral Switch or Swap Duration measures the amount bywhich the price of a bond changes in response to a given move in itsyield to maturity (YTM). A duration-neutral switch is where the buyersells a bond with a given YTM and buys a bond of the same credit riskbut with a higher YTM, thus improving his return to maturity.

Emerging Market A developing country, in which investment would beexpected to achieve higher returns than in a developed market but beaccompanied by greater risk. Saudi Arabia is an emerging market.

Eurodollars Dollars belonging to non-residents of the United Statesinvested in external money markets. Eurodollar settlements are madeover a banking account in the US and form part of the USmoney supply.Eurodollars are not subject to the same regulations as domestic dollars.

External Managers External money managers are third parties to whoman institution such as a central bank out-sources the management of itsassets, such as equities and bonds.

Equity Investments Generally refers to the buying and holding of sharesor stock on a stock market by individuals and firms in anticipation ofincome from dividends and capital gains, as the value of the stock rises.Equities are known in the United States as stocks and in the UnitedKingdom as shares.

Forward Foreign Exchange Transaction A foreign exchange settle-ment later than spot rate (i.e. at a settlement date beyond the nearestsettlement date) at a pre-determined rate, calculated as the spot rate,

312 GLOSSARY

plus the swap rate based on the interest rate differential between thetwo currencies.

Government Development Bond (GDB) A coupon-paying bond inlocal currency issued by the government of Saudi Arabia.

Hedging An arrangement whereby the risk of holding an asset is offset byholding another asset. For instance, an American investor holding aJapanese bond while engaged in a forward foreign exchange transactionby selling the yen forward against the dollar is hedging the currency riskin the yen.

Internal Managers Staff directly employed by an institution such asSAMA to manage its assets such as equities and bonds.

Investment Benchmark A standard against which the performance of anactively managed security portfolio or investment manager can bemeasured. Generally, broad market and market-segment stock andbond indexes are used for this purpose. Under-performance of a bench-mark means the portfolio has returned less in the time period; out-performance means it has returned more than the benchmark.

Leverage The use of financial instruments or borrowed capital, such asmargin, to increase the potential return of an investment. In businessterms, the amount of debt used to finance a firm’s assets. A firm withsignificantly more debt than equity is considered to be highly lever-aged. A bank is typically very highly leveraged compared to otherbusinesses.

Liquidity In a multicurrency-investment portfolio the liquidity of a givenforeign currency has to be viewed in terms of exchange liquidity andinstrument liquidity. Exchange liquidity depends upon the ease withwhich a currency can be converted into and out of another majorcurrency. Instrument liquidity depends upon the ease with which anegotiable instrument denominated in that currency can be purchasedand sold without noticeably affecting the market rate for that instru-ment. Both types, exchange liquidity and instrument liquidity, deter-mine the overall liquidity of a given currency in a portfolio. In domesticcurrency situations, liquidity generally refers to instrument liquidity.The global financial crisis of 2008–09 was notable for the drying up ofliquidity across a range of markets.

Loan to Deposit Ratio (LDR) A measure of the ratio of the volume oflending (assets on the balance sheet) by a bank compared to thedeposits (liabilities on the balance sheet). An LDR below 100 percentindicates loans are less than deposits. A regulatory tool used by SAMA

GLOSSARY 313

on the basis that the lower the LDR the less risky are the operationscarried out by the bank.

London Interbank Offered Rate (LIBOR) This rate is often used asthe basis for pricing Eurodollar loans. The lender and the borroweragree to a markup over LIBOR, and the total of LIBOR plus themarket makes the effective interest rate for the loan. Typical LIBORperiods are one month and six months.

Long ‘Going long’ is the market term for buying a security or currency inanticipation of a rise in price. An example is buying a currency inanticipation of an upward revaluation.

Money Market Instruments The most popular money market instru-ments are Treasury Bills (or the equivalent in local currency), commer-cial paper, bankers’ acceptances and certificates of deposit.

Offer Rate The price at which a quoting party is prepared to sell orprovide a currency or loan. See LIBOR.

Offshore Banking Unit (OBU) A financial institution (typically a bank)located outside the jurisdiction of the central bank in whose currency itis doing business. An offshore market is a market outside thisjurisdiction

Open Market Operation Open market operations are conducted by acentral bank in its domestic money market to reduce or increase themoney supply and hopefully alter liquidity conditions. For instance, thepurchase of government bonds will increase the money supply andimprove liquidity as the central bank pays cash for the instrument.Conversely, selling government bonds will decrease the money supplyand reduce liquidity in the market. Repurchase agreements are typicalmoney market operations.

Optimal Currency Area A geographical region in which it wouldimprove economic efficiency to have the entire region share a singlecurrency.

Passive Investment Management Holding a basket of securities to clo-sely follow the return on a benchmark without using human or com-puter skills.

Project Finance The financing of long-term infrastructure, industrialprojects and public services based upon a non-recourse or limitedrecourse financial structure, in which project debt and equity used tofinance the project are paid back from the cash flow generated by theproject. Toll highways are typical examples of projects financed in thisway.

314 GLOSSARY

Purchasing Power Parity (PPP) Theory A theory which assumes that inthe long run exchange rates adjust to reflect the relative inflation ratesof the two currencies. PPP can be difficult to estimate when the goodsand services consumed are very different in each country.

Random Walk The observation that many asset prices such as oil followno discernible pattern or trend. See also Duration Dependence.

Repurchase Agreement Commonly known as a Repo. A contract inwhich the seller of an asset (say, a government bond) agrees to buy itback on a specific date. This technique is frequently used for raisingshort term liquidity by dealers to finance their positions. Central banksuse repos to increase liquidity in the financial system.

Reserve Requirement An amount of money (usually a percentage ofdeposits) which commercial banks in a country are required to keepon deposit with the central bank. Originally, these requirements weredesigned to protect the solvency of banks. Today, central banks, espe-cially in emerging markets, adjust requirements principally as a tool toaffect the money supply and the liquidity of the banking system, that is,its ability to make loans.

Reverse Repurchase Agreement Also known as a Reverse Repo. A con-tract in which the buyer of an asset agrees to sell it back on a specificdate. Central banks use reverse repos to withdraw liquidity from thefinancial system.

Riyal The Saudi riyal (SAR) is the currency of Saudi Arabia.Saudi Arabia Interbank Offered Rate (SAIBOR) The riyal equivalent

of LIBOR for the dollar.Shariah-Compliant A term applied to financial instruments that are

deemed not to breach the rules of Shariah, principally a prohibitionon paying or receiving interest. Often known as Islamic instruments.

Short ‘Going short’ is the market term for selling a security or currencywhich the investor does not hold, typically promising to deliver it at afuture time. An example is selling a currency short in anticipation of adevaluation.

Short Covering The purchase by an investor of a security or currencypreviously sold short in order to deliver them and thereby to close outhis short position.

Soft Deposit Money placed by the central bank with a local bank onconcessionary terms (generally by a lower interest rate than themarket interest rate) in order to help the bank through a difficultperiod.

GLOSSARY 315

Sovereign Risk The risk that the government of a country may interferewith the repayment of a debt. This can happen when a borrower iswilling to repay a loan in local currency, but the government may notallow him to repay the loan to a foreign bank because of a lack offoreign exchange or for political reasons. The sovereign governmentitself may be unwilling to pay a loan taken out in foreign currency. In anextreme situation, there may be a sovereign debt default.

Special Drawing Right (SDR) A composite fiduciary reserve asset (onlyan entitlement to credit) created in 1970 by the IMF as a supplement toexisting reserve assets. The SDR is worked out from a basket of fixedamounts of major trading currencies. The SDR has failed to makeheadway outside official institutions such as central banks. As at end-2016 the currencies in the SDR basket were the dollar, euro, yen,sterling and the yuan (or renminbi).

Sukuk A Shariah-compliant bond instrument.Swap Line See Central Bank Swap.Treasury Bond A term typically applied to a bond issued by the US

Treasury as a direct obligation of the government of the United Statesand known as a US Treasury, or simply as a Treasury. Instruments thatare shorter than a year and pay no coupon are Treasury Bills. See Zeros.

Yield Curve A graphical representation of yield to maturity (YTM) foreach different maturity of a financial instrument, such as US Treasuries.Time to maturity is represented on the horizontal axis. When longermaturities have higher YTM than shorter maturities, which is thesituation most of the time, the curve is called a positive, upward-slopingor normal curve. The opposite type of curve is called a negative, down-ward-sloping or inverted yield curve. When YTM is the same for allmaturities it is called a flat yield curve.

Yield to Maturity (YTM) The return a security earns on the price atwhich it was purchased if it is held to maturity. This is a function ofcoupon rate, reinvestment rate and accrual or amortization of pre-mium. The critical assumption is that all coupon payments are rein-vested at the same YTM (i.e., the calculation is an unrealistic one).

Zero Coupon Instruments Commonly known as Zeros. Securitiesissued in the primary market at a discount to their principal amountat final maturity, with no coupons attached and paying no income, sothat the return consists entirely of capital gain with no reinvestmentrisk. Treasury and Central Bank Bills are zeros, normally with a max-imum maturity of one year.

316 GLOSSARY

INDEX

AAbdulaziz, Abdullah bin, King

2005-15, 136, 160, 186, 253Abdulaziz, Fahd bin, King 1982-

2005, 77, 97, 136, 147, 162,186, 210n4, 251

Abdulaziz, Faysal bin, King1964-75, 21, 33, 35, 37, 38, 41,42, 47, 50, 63, 246, 250

Abdulaziz,Khalid bin,King1975-82, 77Abdulaziz, Salman bin, King 2015-

present, 298Abdulaziz, Saud bin, King

1953-64, 21, 27, 28, 29,30, 36, 38

Active investment management, 309Ahkdar, Farouk, 50Ahmed Hamad Al-Gosaibi & Brothers

(AHAB), 151–153, 163, 265,270, 274, 277, 279, 284

Al-Athel, Abdulaziz, 306Aldossari, Fahad, 307Abdullatif, Ahmed, 54, 59, 60, 85,

92, 210n4Alfuraih, Abdulaziz, 288, 306Alfuraih, Ahmed, 306Alhekail, Hashem, 307Alhumaidah, Fahad, 211

Ali, Anwar, 34, 39, 42, 43, 47,50–55, 61, 75n6, 251,289, 301–302

Al-Jasser, Muhammad, 13n1, 144,150, 162, 204, 233,304–305, 307

Al-Jazira Bank, 48n3Al-Juffali, Khalid, 306Alkholifey, Ahmed, 162, 190n1,

298, 306Almubarak, Fahad, 147, 162, 163,

287, 288, 304, 305–306, 307Al Rajhi Bank, 10, 70, 72–73,

125–126, 129, 140, 153,267, 281

Al Saud, Abdul Aziz, King 1932-53,18, 19, 20, 21, 27, 28, 29, 30,31n2, 33, 36, 38, 64, 187, 245,246, 294, 298

See also Ibn SaudAlshathri, Fahad, 307Alsheikh, Ahmed, 307Alsayari, Ayman,

197, 307America, see United StatesArab League boycott, 94Arab Monetary Fund (AMF),

169, 171


317

Aramco, 3, 9, 13n4, 23, 24, 25, 26,27, 40, 44, 51, 56, 59, 88, 151,245, 291

nationalized, 40, 44, 59part-privatization planned under

Vision 2030, 3, 291, 294Asia

financial crisis of 1997-1998 in, 7,111, 114, 120, 121,149, 230

Saudi oil market in, 256, 258tilt to, 291

Association of East Asian Nations(ASEAN), 173, 179, 183, 189

BBahrain, 22, 63, 70, 96, 151, 152,

170, 171, 177Balance of payments, 5, 50, 119, 227Banafe, Ahmed, 5, 13, 14, 107,

233, 244n5Bank of England, 55, 75n6, 92Bankers’ Security Deposit Account

(BSDA), 96, 97, 98Banking, see Conventional/Western

banking; Shariah-compliantbanking

Banking Dispute SettlementCommittee, 153

See also Saad-AHAB affairBanking regulation, 187, 280Banking Vision 2020, 274Bank for International Settlements

(BIS), 131, 177Bank of Japan, 58, 61Bankruptcy code, 152Baring Brothers, 54, 55, 79, 195Basel Committee for Banking

Supervision (BCBS),309

Basel standardsBasel I, 309Basel II, 265Basel III, 141, 267, 270, 276,

283, 284n7Basket, Band and Crawl (BBC)

exchange rate regime, 242BCBS (Basel Committee for Banking

Supervision), 309Berger, Tom, 84, 210n3BIS (Bank for International

Settlements), 131, 177Black, Bill, 89, 93, 95, 98, 99,

102, 210n3Black market rate for US

dollars, 36–39, 42Blowers, George, 28, 35, 36Bond market

primary, 220, 222, 223secondary, 139, 214, 215, 220,

221, 223Bonds, 8, 42, 46, 50, 52, 55, 57, 58,

59, 64, 66, 67, 70, 73, 79, 86, 87,90, 93, 99, 100, 107–108, 115,116, 118, 119, 121, 124, 132,139, 140, 141, 148, 156–160,163, 185, 195–199, 202, 204,205, 207, 209, 214–223,251–253, 256, 270, 274, 282

swapping, 87, 99, 158Bond yields, 66, 93, 156, 157,

195, 208Bretton Woods conference in 1944,

310Bretton Woods monetary system, 246,

248, 249British Aerospace, 90BSDA (Bankers’ Security Deposit

Account), 96, 97, 98Budget deficit, 4, 5, 27, 37, 69, 80,

82, 116, 129, 163, 220, 270

318 INDEX

Budget policy, 9, 41, 45, 52, 69,154, 182, 220, 227, 238,239, 265

See also Fiscal policyBudget surplus, 5, 39, 68, 69, 97,

175, 228Bundesbank, 61Bush, George H. W., 135Business cycles, as synchronized and

unsynchronized in Euro Area andGCC, 179, 180,182, 183

CCalifornia Arabian Standard Oil

Company (CASOC), 23See also Aramco

Capital Adequacy Ratio (CAR), 270,272, 284n7

Capital controls, 10, 35, 38, 39, 42,71, 107, 255, 256, 258, 259, 260

in Cyprus, 255Capital Market Authority

(CMA), 130, 137, 217,263, 289

Carter, Jimmy, 66CASOC (California Arabian Standard

Oil Company), 23See also Aramco

CDO (collateralized debtobligation), 148

CEDA (Council on Economic andDevelopment Affairs), 163n4

Central bank bills, 97, 107, 141, 215,216, 217, 244n4

control of system liquidity,216, 217

See also Saudi Arabian MonetaryAgency (SAMA)

Chase Manhattan Bank, 56

Chile, 238, 240China

renminbi currency in, 242, 249,256–261

Saudi market in, 25, 146, 194,246, 253, 256, 258, 259,260, 270

voluntary export surpluses, 194Collateralized debt obligation

(CDO), 148Consumer Protection Principles,

Saudi, 275Conventional/Western banking, 7, 8,

10, 18, 35, 49, 51, 69, 70,125, 126, 127, 148, 150,156, 161, 162, 185, 194,207, 218, 219, 222, 254,276, 281–283

Cooperative Insurance Regulations, 263Cost-push inflation, 142Council on Economic and

Development Affairs(CEDA), 163n4

Credit criteria for SAMA’sinvestment, 202, 206

Credit rating agencies, 159,202, 205

CrisesAsian financial crisis of 1997-

1998, 7, 111, 114, 120, 121,149, 230

Cyprus banking crisis of 2013, 255Greek crisis in 2010, 178Mexican crisis of 1982, 71oil crisis in 1973-75, 33, 68, 128oil crisis in 1979-81, 227See also Global financial crisis of

2008-2009Currency Law, 195, 200, 233Currency peg, see Peg, currencyCyprus, 255

INDEX 319

DDammam, Saudi Arabia, 23, 25, 44,

72, 104Debt

CDO, 148DMO, 215, 223domestic, 5,

96, 97foreign currency, 98low debt, 180

Debt episodes, Saudi, see Bankers’Security Deposit Account;Floating rate notes; GovernmentDevelopment Bonds; Saudi debtepisodes

Debt Management Office(DMO), 215, 223

Demand-pull inflation, 66Dependency, 3,

6, 298See also Diversification

Deutschmark, German, 59,61, 67

Development plans, 3See also Five Year Plans

Diraiyah, 63, 84Disintermediation, 220Diversification, 3, 47, 61, 64, 68,

106, 112, 137, 146, 186,188, 190, 198, 199, 202,207, 225, 241, 258,294, 298

See also DependencyDomestic-Systemically Important

Banks (D-SIBs), 276, 279Dubai, 135, 137, 140, 150, 151, 153,

169, 185, 193Dubai World bankruptcy, 153, 185Duration dependence, 110,

111, 297See also Roulette wheel, Randomwalk

EEC (European Commission), 171,

210n1ECB (European Central Bank), 125,

149, 175, 176Economic Development Fund

(EDF), 41Egypt, 19, 35, 36, 37, 41, 49, 63,

105, 245End of service benefits (ESB), 221Equities, 52, 57, 68, 116, 117,

205, 207See also Tadawul (Saudi Stock

Exchange)Equity managers, 93,

95, 96ESB (end of service benefits), 221Euro, 140, 170, 172, 173, 174, 176,

177, 178, 180–185, 187,189–190, 248, 249, 255, 256,258, 260, 261n6

numeraire status, 249, 257–258Euro Area, 140, 174, 178, 180,

181–185, 189, 190, 248, 255,258, 261n5

declining market for Saudi oil, 77Eurodollars, 58, 66, 91, 118, 157, 312European Central Bank (ECB), 125,

149, 175, 176European Commission (EC), 171,

210n1European Union (EU), 171Europe, Western, 256, 291, 292Exchange rate, 9, 10, 26, 36, 37, 38,

45, 59, 61–63, 102, 103, 120,121, 132, 142, 143, 170, 172,177, 180, 187, 188, 199, 222,226, 231–239, 241, 242, 243,248, 249, 253, 255, 256, 260,295, 297

See also Peg, currency

320 INDEX

Expatriate labor, 4, 25, 83, 112, 132,142, 181, 229, 294, 295

See also Foreign workers

FFairbrother, Jeremy, 85, 86, 89,

210n3FDI (foreign direct investment), 132,

146, 241Fed (US Federal Reserve Board), See

US Federal Reserve Board (Fed)Federal Reserve System, 133n1

See also US Federal Reserve BoardFinance ministers, 18, 20, 26, 30, 36,

37, 38, 43, 47, 55, 89, 99Finance Ministry, 5, 21, 25, 26, 28,

35, 37, 38, 56, 68, 96, 97, 100,111, 113–115, 132, 139, 140,141, 161, 174, 215, 297

Finances, 5, 7, 20, 22, 24, 25, 26, 30,39, 40, 47, 82, 99, 101, 103,106, 110, 118, 128, 139, 197,213, 214, 251

Saudi and US compared, 7, 40, 82,101, 128

Financial Stability Report ofSAMA, 271, 279, 280

First National City Bank, 48n4, 72See also Saudi American Bank;

Wriston, WalterFiscal policy, 9, 45, 62, 131, 144, 170,

234, 247fiscal rule, 186, 238, 295,

296, 297See also Budget policy

Fitch Ratings, 159, 202Five Year Plans, 51, 61, 64, 80

See also Development plansFloating rate notes (FRN), 115,

214, 223

Ford, Gerald R., 49Foreign direct investment (FDI), 132,

146, 241Foreign exchange reserves

gold, 41, 44, 46losses, 72, 79outflows, 5, 56, 79, 83, 86, 90, 295profits, 39, 230See also 90 percent solution

Foreign workersGreen Card system for, 294–295remittances from, 4, 9, 111, 112,

200statistics for,

119, 142tasattur, 112See also Expatriate labor

FRN (floating rate notes), 115,214, 223

GGCC (Gulf Cooperation

Council), 172, 174GDBs (Government Development

Bonds), 115, 214, 215, 222, 223GDP (gross domestic product), 3, 81,

121, 136, 170, 227, 267, 293General Organization for Social

Insurance (GOSI), 99General Reserve Account, 52, 98, 100,

116Germany, 52, 59, 68, 87, 153, 175,

185, 195Global financial crisis of 2008-

2009, 137, 141, 145, 148, 154,162, 163n3, 180

185, 186, 193, 204, 205, 232, 243,254, 270, 289

GMC (Gulf Monetary Council),176, 186

INDEX 321

GMU (Gulf Monetary Union), 140,169, 170

Goldcounterfeit coins, 35–36in foreign exchange reserves, 41,

44, 46Saudi coinage, 21, 22, 25, 26

Gold standard, 22, 25, 29, 44GOSI (General Organization for

Social Insurance), 99Government Development Bonds

(GDBs), 115, 214, 215,222, 223

Government Pension Fund Global(GPFG) [Norway], 209

See also Sovereign Wealth FundGovernment spending, 2, 4, 5, 9, 11,

33, 38, 39, 41, 44, 62, 64, 67, 74,79, 82, 84, 87, 114, 118, 119,130, 141, 154, 242, 268, 270,283, 295

GPFG (Government Pension FundGlobal) [Norway], 209

See also Sovereign Wealth FundGreek crisis in 2010, 178Green Card system, 294–295Gross domestic product (GDP), 3, 81,

121, 136, 170, 227, 267, 293Gulf banknote, 170, 172, 187, 189Gulf Cooperation Council

(GCC), 172, 174Gulf Monetary Council (GMC),

176, 186Gulf Monetary Union (GMU), 140,

169, 170Gulf War in 1991, 78, 105

See also Khafji

HHashemite Kingdom of Jordan, 41,

48n3, 171

Hawes, Tony, 60, 61, 210n3Hejaz, 18–21, 31n1Home mortgages, 160, 161, 186,

267, 280Housing shortage, 160Al-Hamidy, Abdulrahman, 288, 307Hussein, Saddam, 78, 101, 135,

169, 171

IIbn Saud, 2, 18, 30, 31n2, 245, 246,

294, 298See also Al Saud, Abdul Aziz

IDB (Islamic DevelopmentBank), 171

IEA (International EnergyAgency), 146

IFSB (Islamic Financial StandardsBoard), 127

Imported-inflations, 45,242, 243

Inflationcost-push, 142demand-pull, 66imported, 45, 242, 243pass-through, 59Saudi, 13n8, 225, 226US, 57, 66, 118, 132,

149, 208Informal expatriate business owners

(tasattur), 112Ingrams, Leonard, 54, 55, 57, 61, 66,

85, 96, 210n3Institute of Banking (IOB), 288Institute of Finance (IOF), 288Insurance

Cooperative InsuranceRegulations, 263

GOSI, 99NCCI, 122Saudi Deposit Insurance Fund, 267

322 INDEX

The International BankingCorporation (TIBC), 151

See also Saad-AHAB affairInternational Energy Agency

(IEA), 146International Monetary Fund (IMF)

Article 4 reviews, 173FSAP, 133n6, 163n1Saudi Arabia seat on Executive

Board of, 252International Monetary System, 68,

245, 246, 248, 249, 252, 253,255, 258, 259, 260, 261n6

numeraire in, 246, 249, 258,259, 261n6

Investment Department of SAMA(Investment Deputyship), 45, 54,56, 92, 93, 94, 99, 111, 115,196, 210n4, 211n6, 213, 287

Investment portfolio (IP), 195,199, 200

Investment process, 197, 198IOB (Institute of Banking),

288IOF (Institute of Finance), 288IP (investment portfolio), 195,

199, 200Iran

Iran/Iraq war, 64, 78, 79, 106,128, 171, 251

Khomeni and, 64revolution and second oil crisis in, 1,

171, 251Iraq

Hussein, Saddam, 78, 101, 135,169, 171

Iran/Iraq war, 64, 78, 79, 106,128, 171, 251

Islammoney in, 18Quran, 7, 18riba, 7, 8, 28, 30

scholars of, 122, 282Shariah law, 7, 126, 127, 160, 161,

281–283See also Shariah-compliant banking

Islamic Development Bank(IDB), 171

Islamic Financial Services Board(IFSB), 127

JJapan, 52, 57, 58, 61, 68, 87, 90, 104,

157, 195Bank of Japan, 58, 61Memoranda of Understanding

with, 195yen, 58, 61, 67, 249, 260

Jeddah, Saudi Arabia, 17, 19, 20, 21,23, 24, 26, 28, 29, 30, 33, 35, 36,38, 43, 52, 54, 57, 58, 59, 60, 63,64, 73, 92, 93, 96, 103, 160,171, 213, 245

Jordan, Hashemite Kingdom of, 41,48n3, 171

KKandara Palace Hotel, 54Keynes, John Maynard, 4, 248, 259

See also Bretton Woods monetarysystem

Khafji, 77, 78, 104See also Gulf War in 1991

Al-Khatib, Mohammed Omar, 130,210n4, 213–214

Khasanah Nasional, 221Khomeni, Ayatollah, 64King Abdullah Financial District,

186Kissinger, Henry, 49, 54Kuwait

currency peg, 150, 187

INDEX 323

Kuwait (cont.)dinar, 102, 103, 104, 169,

170, 175Gulf War in 1991, 78, 105

LLawrence, T. E., 20LCR (liquidity coverage ratio), 141LDR (loan to deposit ratio), 234,

266, 294Lehman Brothers, 137, 149, 185LIBOR (London Interbank offered

rate), 115Libya, 2, 44, 194Liquidity coverage ratio (LCR), 141Loan to deposit ratio (LDR), 234,

266, 294Loans

LDR, 234, 266, 294long-term, 70, 99, 122, 147, 151,

222, 268, 269NPLs, 126, 265offshore, 70, 71, 151, 152SAMA loans to IMF, 161short-term, 51, 151, 246, 252

London Interbank offered rate(LIBOR), 115

MMacroprudential policy, 277, 278Makkah, Saudi Arabia, 18, 19, 36, 65Al-Malik, Ahmed, 85, 102, 210n4Mandelson, Peter, 193, 210n1Al-Manakh affair, Souk, 74MAS (Monetary Authority of

Singapore), 242Memoranda of Understanding, 195Mexico, 71, 131, 237, 251,

252, 253

Ministry of Commerce andIndustry, 217

Ministry of Housing, 161Minter, Jonny, 60, 61, 210n3Monetarism, 70Monetary Authority of Singapore

(MAS), 242Monetary Policy, 9, 20, 22, 70, 79,

131, 176, 179, 182, 183, 184,190, 210n4, 215, 216, 225–227,232, 233, 241, 242, 251,278, 289

Monetary trilemma, 226, 248Monte Carlo effect, 109

See also Random walk, Durationdependence

Moody’s Investors Service, 202Morgan Guaranty Trust, 23Morgan Stanley Saudi Arabia, 147Mortgages, home, 160, 161, 186,

267, 280Mulford, David, 54, 55, 57, 59, 66,

75n7, 84, 210n3Multiplier, 4, 39, 82, 83, 111

See also Keynes, John MaynardMundell, Robert, 178Muscat agreement, 174Mutual funds, 128, 129, 219,

221, 274

NNaira (Nigerian currency), 236National accounts, 3, 4National Commercial Bank

(NCB), 42, 72, 273National Company for Cooperative

Insurance (NCCI), 122Netherlands Trading Company, 21,

23, 29, 42, 48n3See also Saudi Hollandi Bank

Nigerian currency (naira), 236

324 INDEX

9/11 attacks, 12890 percent solution, 4, 5, 6, 57, 79,

80, 83, 89, 98, 106, 118, 119,130, 131, 296

See also Foreign exchange reservesNixon, Richard M., 49Non-oil economy, 3, 13n4, 80, 83,

122, 138, 153, 214, 232, 234,279

Non-oil revenues, 3, 81, 291,295, 299n5

Non-performing loans (NPLs),126, 265

Norway, 153, 193, 195, 205, 225,238, 239, 241, 296

fiscal arrangements, 238See also Government Pension Fund

GlobalNumeraire

dollar and, 246Euro and, 249, 257–258in International Monetary

System, 246, 249, 258, 259,261n6

multipolar view of, 257renminbi and, 249, 256–261twin functions of, 246

OOffshore banking units (OBUs), 63,

71, 96, 97See also Bahrain

Oilcrisis in 1973-75, 33, 68, 128crisis in 1979-81, 227curse and blessing, 298diversion of exports to domestic

use, 294economy, 2, 3, 13n4, 80, 83, 122,

138, 153, 214, 227, 232, 234,279

market, 2, 74, 102price of, 2, 4, 6, 7, 8, 12, 44, 47, 50,

51, 58, 61, 63–68, 74, 78, 81,88, 90, 101, 102, 106, 107,109, 110, 111, 113, 114, 120,133n1, 135, 137–139, 142,149, 150, 154, 157, 163, 172,175, 182, 194, 213, 214, 226,227, 228, 229, 230, 232,234–237, 239, 241, 243n2,251, 253, 256, 260, 264,265, 268, 270, 273, 279,280, 283, 291, 293, 294,295, 296, 297

revenues from, 3, 4, 5, 6, 8, 26, 35,36, 39, 40, 41, 44, 47, 51, 61,78, 79, 81, 88, 93, 102, 106,113, 114, 116, 118, 119, 121,142, 145, 186, 227, 291, 295

shale, 2, 256, 291See also Random walk; Duration

dependenceOman, 171, 175, 178, 182OPEC (Organization of the

Petroleum ExportingCountries), 250

Optimal currency areahigh fiscal transfers, 180labor and capital mobility, 180low debt, 180open economy, 179, 180suitability of GCC members

for, 172, 174, 182, 186, 188,237

synchronized business cycles, 179,180, 182, 183

wage and price flexibility, 179, 180Organization of the Petroleum

Exporting Countries(OPEC), 250

‘Original sin,’ 187

INDEX 325

PPalais Royale Initiative, 259, 260Passive investment management, 195,

203, 205Pass-through inflations, 59Peg, currency

credible, 83, 236, 237, 241,243

GCC countries to dollar, 235, 236Kuwait, 150, 187unvarying, 231varying, 231, 236See also Exchange rate

Performance Measurement, 205, 206Petrodollars

oil crises and, 68recycling, 49, 50, 51, 73, 75n9,

249, 250Pilgrim receipts, 36, 225Plaza Accord in 1985, 68, 87Population statistics, 9, 112, 129,

275, 294See also Foreign workers; Expatriate

laborPrice-elasticity of demand, 229, 232Primary dealers, 214, 222, 223Private placements, 57, 60, 100, 185,

195, 217Producer, swing, 2, 88Project finance, 136, 145, 146, 154Public Investment Fund (PIF), 46, 72,

122, 156, 221, 263, 273, 291See also Sovereign Wealth Fund

QQatar, 78, 142, 170, 171, 177Al-Quraishi, Abdulaziz, 53, 54, 57,

61, 67, 71, 73, 74, 85, 93,95, 106, 123, 302, 303, 307

Quasi-fiscal deficit, 217

Quasi-government funds, 99, 100,115, 116, 120, 123, 220, 263

Quran, 7, 18See also Islam

RRabigh, Saudi Arabia, 147, 148Random walk, 6, 109, 133n1, 214,

240, 297See also Roulette wheel; Duration

dependenceRas Tanurah oil refinery, 24, 27Reagan, Ronald, 65Real Estate Development Fund

(REDF), 160, 161, 263Real Estate Financing

Corporation, 161Real estate investment, 207Recycling, 49–51, 73, 145, 248, 249,

250See also Petrodollars

Regulationsbanking regulations, 187, 280Banking Vision 2020, 274foreign assets, 162, 163, 217, 233,

263Renminbi, 242, 249, 256–261Repurchase (repo) facility, 107

See also Reverse repurchaseagreement (reverse repo)

Reserve portfolio (RP), 195, 198, 200Reserves ratio, banking, 42Reserves, and voluntary and

involuntary accumulation, 194See also Foreign exchange reserves

Reverse repurchase agreement (reverserepo), 140

See also Repurchase (repo) facilityRiba, 7, 8, 28, 30, 185Risk-adjusted return,

198, 199

326 INDEX

Risk managementcounterparty, 206liquidity, 197, 206market, 197, 206–207operational, 202, 206

Risk parity, 207, 208Riyad Bank, 42, 43, 48n4, 72, 264Riyadh, Saudi Arabia, 2, 17, 19, 27,

28, 30, 44, 45, 48n1, 50, 58, 63,64, 68, 84, 85, 90, 93, 96, 99,102, 103, 104, 137, 138, 140,143, 148, 153, 160, 171, 177,186, 273, 288

Riyaldevaluation crises, 150, 230dollar-shadowing, 62exchange rate, 62, 226international currencies and, 70, 74liquidity, 70revaulation crisis 2007-2008, 45,

143, 144Roaring Nineties, and stock

markets, 118Roosevelt, Franklin Delano, 23, 245,

246Roulette wheel, 6, 12, 109, 175, 182,

256, 295See also Random walk, Duration

dependenceRP (reserve portfolio), 195, 198, 200

SSaad-AHAB affair, 152, 153, 163,

277, 279, 284See also Ahmed Hamad Al-Gosaibi

Limited (AHAB)Saad Group, 151SAA (Strategic Asset Allocation), 197SABIC (Saudi Arabian Basic Industries

Corporation), 129

SAGIA (Saudi Arabian GeneralInvestment Authority), 132, 135

SAMA (Saudi Arabian MonetaryAgency), see Saudi ArabianMonetary Agency (SAMA)

Al-Sanea, Maan, 151–152Santiago Principles, 194

See also Sovereign Wealth FundSARIE (Saudi Arabian Riyal Interbank

Express), 125Saudi American Bank, 72, 153, 265

See also First National City Bank;Wriston, Walter

Saudi Arabia, 1–13, 17–31, 33–48, 49,50–53, 58, 65, 69, 70, 72, 73,77–79, 82, 83, 85, 88, 96,103–107, 110, 111, 113, 125,127–129, 131, 132, 135, 136,140, 142, 143, 145–147, 149,150, 154, 156, 160, 169–171,175, 177, 185, 194, 200, 214,215, 220, 221, 222, 225, 227,230, 232–243, 245–248,251–256, 258–260, 267,270–284, 291–299

inflation in, 13n8, 225, 226population statistics, 9, 112, 129

Saudi Arabian Basic IndustriesCorporation (SABIC), 129

Saudi Arabian General InvestmentAuthority (SAGIA), 132, 135

Saudi Arabian Monetary Agency(SAMA)

Ali, Anwar and, 38, 42, 43, 47, 50,51, 251, 289

annual reports, 6, 11, 12, 34, 39,62, 65, 68, 69, 71, 112, 116,119, 120, 121, 124, 130, 140,158, 159, 163n1, 257

Banking Control Law, 43, 264BSDAs, 96, 97, 98, 100, 107

INDEX 327

Saudi Arabian Monetary Agency(SAMA) (cont.)

central bank, 2, 5, 7, 8, 9, 29, 33,35, 36, 38, 41, 42, 56, 62, 64,70, 72, 73, 74, 87, 92, 96, 97,99, 102–104, 106–108, 111,115, 119, 122–125, 127–129,131, 137, 139, 140–150, 152,153, 156, 159, 161, 162, 169,174, 175, 176, 177, 178, 182,185, 194, 195, 197, 199, 205,207, 209, 214–217, 220–223,226, 229, 230, 241, 242, 243,252, 253, 259, 260, 263, 264,265, 267, 276, 277, 279, 280,287, 288, 289, 298

Charter, 7, 28, 29, 38, 97, 99, 242Consumer Protection

Principles, 275credit criteria for investments

by, 202, 206Deposit Insurance Fund, 267early problems, 4founding of, 2GDBs, 124home mortgage regulation, 267IMF loans from, 161investment culture, 195, 196, 220Investment Department or

Investment Deputyship of, 45,54, 56, 92, 93, 94, 99, 111,115, 196, 210n4, 211n6,213, 287

reorganized in 2013, 275Saudization, 43, 71, 72, 102, 123,

265, 275, 294target of blame, 264See also Investment Department of

SAMA; SAMA annual reports;SAMA central bank

Saudi Arabian Riyal Interbank Express(SARIE), 125

Saudi British Bank, 72, 123Saudi Cairo Bank, 48n4, 72, 264, 265Saudi Credit Bureau (SCB), 127, 161,

265, 289Saudi debt episodes

in 1988-2007, 214, 215, 216, 220,221

in 2015, 215, 220See also Bankers’ Security Deposit

Account, Floating rate notes,Government DevelopmentBonds

Saudi French Bank, 48n3, 72Saudi Hollandi Bank, 42, 57, 72

See also Netherlands TradingCompany

Saudi Industrial Development Fund(SIDF), 46, 70, 153

Saudi Interbank offered rate(SAIBOR), 115, 222

Saudi International Bank (SIB), 90Saudi Stock Exchange (Tadawul), 137,

146, 147Saudization, 43, 72, 123Al-Sayari, Hamad, 85–87, 89, 90, 93,

95–96, 98, 99, 100, 103, 104,106, 144, 150, 162, 176, 259,287, 302–304, 306, 307

Securities lending, 201, 204Shariah-compliant banking, 7, 10, 42,

72–73, 104, 122, 125–128, 140,153, 154, 161, 162, 185, 215,218, 222, 267, 269, 276, 281

banking services and investmentproducts, 281

judges, 160, 161, 162lack of hedging instruments, 283law, 125, 126

328 INDEX

product fragmentation, 283regulatory challenges,

282, 283See also Islamic banking; Sukuk

Al-Shumrani, Mohammed,130, 210n4

Shura Council, also called Majlis As-Shura, ConsultationCouncil, 142, 144, 161, 288

Silver, 21, 22, 25, 26, 252Simon, William, 50, 52, 53Sovereign Wealth Fund (SWF), 3, 55,

73, 195, 205, 209, 238Special Drawing Rights (SDR), 45, 52,

61, 62, 243, 257, 260renminbi joins basket of currencies

comprising, 242See also International Monetary

FundSpecialized Credit Institutions

(SCIs), 44, 70, 123Spending, Deficit, 111

See also Budget Deficit; Fiscal DeficitStandard Oil Company of California

(SOCAL), 23See also California Arabia Standard

Oil CompanyStandard and Poor’s (S&P) Global

Ratings, 132, 136Standish, Ralph, 36, 38Stock markets

Roaring Nineties, 118Tadawul, 137, 146, 147

Strategic Asset Allocation (SAA), 197Suez Crisis in 1956-1957, 35, 37, 41Sukuk

corporate, 154, 215, 217, 222government, 154, 215,

217, 222holders, 218, 219

issuers, 215, 217, 222See also Shariah-compliant banking

Al-Suleyman, Abdullah, 18, 20–30,31n2, 35, 36, 57, 213, 214

Supreme Economic Council,129, 150

Swaps, 70, 87, 204SWF (Sovereign Wealth Fund), 3, 55,

73, 195, 205, 209, 238Swing producer, 2, 88

TTactical asset allocation (TAA), 197

See also Non-oil revenuesTadawul All-Share Index (TASI), 129Tadawul (Saudi Stock Exchange), 137,

146, 147Tasattur (informal expatriate business

owners), 112Taxes, 4, 18, 19, 132,

185, 186Thatcher, Margaret, 65, 106TIBC (The International Banking

Corporation), 151See also Saad-AHAB affair

TIPS (Treasury Inflation-ProtectedSecurities), 207

Treasury bills, US,46–47

Treasury bonds, US, 42, 46–47,50, 222–23

Treasury Inflation-Protected Securities(TIPS), 207

UUnited Arab Emirates (UAE), 74,

137, 169, 171See also Emirates

INDEX 329

United Kingdom (UK), 65, 72, 90,106, 123, 173, 180

United Saudi Commercial Bank(USCB),265

United States (US), 7, 11, 12, 22, 23,25, 27, 31n1, 41, 44, 49, 50, 52,57, 58, 66, 82, 87, 90, 110, 117,121, 125, 126, 128, 133n5, 144,148, 149, 152, 160, 161, 178,180, 182, 184, 186, 188, 189,193, 194, 195, 225, 239, 245,246, 247, 256, 258, 259, 260,273, 277, 291, 292

inflation in, 57, 66, 118, 132,149, 208

Memorandum of Understandingwith, 195

Treasury bills,46–47

Treasury bonds, 42, 46–47, 50USCB (United Saudi Commercial

Bank), 265US Federal Reserve Board (Fed), 52,

54, 55, 66, 73, 90, 144, 149,179, 180, 184

VVision 2020, Banking, 274Vision 2030, 290–291,

294–295

WWB (White Weld and Baring

Brothers), see White Weld andBaring Brothers (WB

Western/conventional banking, seeConventional/Western banking

Western Europe, 256, 291, 292White Weld & Co., 54, 55, 59, 79, 84,

195, 210n3White Weld and Baring Brothers

(WB), 54–57, 59, 60, 62, 63, 64,66, 67, 69, 73, 79, 84, 85, 87, 89,90, 91, 93, 94, 95, 96, 98, 102,195, 210n3

Wilberding, Steve, 84–86, 89, 93, 95,98, 99, 210n3

World Trade Organization(WTO), 147

Wriston, Walter, 72, 73

YYamani, Zaki, 65, 88, 89, 91Yansab, 136, 137Yemen, 41, 171Yen (Japanese currency), 58, 61, 67,

249, 260Young, Arthur, 18, 24–31, 33, 35,

48n1, 64, 99, 253

ZZakat (type of capital tax), 18, 19

330 INDEX

Documents

The Saudi Arabian Monetary Agency, 1952 2016