Saudi central bank chief Mohammad al-Jasser on Tuesday blamed an ideology of self-regulation in the banking sector for the global economic crisis and called for comprehensive policing of banks. "The current crisis has shown beyond any doubt that self-regulation is no regulation, just as self-recommendation is no recommendation," Jasser said.
"Some major advanced economies had ... an ideological belief that markets are self-regulating and self-repairing," he said. "It is high time that we dropped the ideologies and theoretical constructs that led us astray and enacted .... comprehensive regulation to prevent the excesses they were the root cause of the problem we are in today," he said.
Jasser, governor of the Saudi Arabian Monetary Agency, was speaking at a Euromoney Saudi Arabia Conference in Riyadh. He credited tough regulation with the stable position of Saudi banks even as those elsewhere had stumbled if not failed. "While we supported decontrol, we never followed the push for banking deregulation too far," he said.
No Saudi bank has failed, though the central bank has had to make liquidity available to them in the toughest stretches of the crisis. SAMA has maintained high capital ratio requirements for the banks, giving them a greater cushion against downturns, But the industry is also less-developed than in other countries.
The home mortgage market is virtually non-existent due to the lack of enabling regulations. That has protected the industry from the kind of real estate defaults which have battered banks elsewhere.