Banking2 Essay Example | Topics and Well Written Essays - 1000 words

Banking2 - Essay Example with the article 7 of the Saudi Banking Control Law the items that are allowed to be held for liquidity reserves by the commercial banks are the following ones: ‘cash, gold or assets’ (article 7). The legal maximum loan size that commercial banks in Saudi Arabia can give is mentioned in the article 8 of the Saudi Banking Control Law. In accordance with this article a commercial bank in Saudi Arabia is not allowed to give a loan which exceeds the ‘25% of the bank’s reserves and paid-up or invested capital’ (article 8). In accordance with the article 10 there is a series of activities prohibited to banks across Saudi Arabia; we could indicatively refer to the following ones: a) to get involved in wholesale or retail trade activities, b) to purchase the shares of a bank operating in Saudi Arabia, c) to acquire or lease real estate – unless this is necessary for the development of the firm’s activities or because of debts to the bank (article 10). The above activities are permitted to banks operating in Saudi Arabia only after the written authorization of the Agency. 5. List 4 activities that SAMA (Central Bank of Saudi Arabia) would implement if it discovers that a commercial bank is not abiding with banking laws especially when those un-allowed activities adversely affect the bank’s ability to repay back its loans and/or affect his liquidity position? In case that a bank operating in Saudi Arabia fails to follow the rules set in the country’s Banking legal framework, then it can be controlled by SAMA; the above authority can take the measures required in order to ensure the protection of the public from the particular organization; in this context, the following activities can be developed – enforced by SAMA: a) appoint one or more appropriately skilled advisers, b) order the suspension of any officer – or even the director – who is considered as responsible for the organizational failures, c) set limits to the credit offered to the