SAUDI ARABIAN MONETARY AUTHORITY - SAMA

1 SAUDI ARABIAN MONETARY AUTHORITY Economic Research Department MONETARY and Banking Developments First Quarter 2017 (2 ) MONETARY and Banking Developments Table of Contents Executive Summary 3 First: MONETARY Policy 4 Rate of Return and Cash Reserve 4 Interest Rates 4 Second: MONETARY Developments 4 Money Supply 4 MONETARY Base 5 Third: Developments of SAMA s Balance Sheet 5 Reserve Assets 6 Fourth: Banking Developments 7 Bank Deposits 7 Commercial Banks Assets and Liabilities 7 Commercial Banks Foreign Assets and Liabilities 8 Commercial Banks Claims on the Private and Public Sectors 8 Commercial Banks' Reserves, Capital, Profits and Branches 10 Commercial Banks' Purchases and Sales of Foreign Exchange 10 Fifth: External Sector 11 Sixth: Banking Technology Developments and Financial Inclusion 12 Seventh: Domestic Stock Market Developments 12 Eighth: Investment Funds 13 Ninth: Specialized Credit Institutions )SCIs( 13 14 Eleventh: Prominent Regulatory Developments in the SAUDI Economy during the 2017 Quarter of 15 (3 ) MONETARY and Banking Developments Preliminary estimates suggest a deficit of SAR billion in the current account balance in Q4 2016 compared to a y/y deficit of SAR billion.

2 Total value of the SAUDI Riyal Inter-bank Express System )SARIE( transactions went up by 24 percent to SAR 18, billion in Q1 2017. Total number of ATM transactions in Q1 2017 was approximately 488 million, with cash withdrawals totaling SAR billion, including transactions through banks network and Mada. The general share price index went down by percent to 7, points at end- Q1 2017. The stock market capitalization also declined by percent to SAR 1,638 billion at end-Q1 2017 as compared to the end of the preceding quarter. Total assets of investment funds managed by investment companies increased by percent to SAR billion in Q1 2017. According to latest available data, total actual disbursements of loans from government Specialized Credit Institutions )SCIs( decreased by 52 percent and total loan repayments to SCIs also decreased by 43 percent in Q3 2016.

3 Executive Summary The repo rate remained unchanged at percent, while the reverse repo rate was raised from percent up to percent. The cash reserve ratio was maintained at percent for demand deposits and percent for time and savings deposits. SAMA also maintained the limit of weekly subscription to treasury bills for domestic banks at SAR billion during Q1 2017. The average three-month SAUDI interbank offered rate )SIBOR( declined to percent in Q1 2017. Broad money supply )M3( decreased by percent, whereas the MONETARY base increased by percent to SAR billion in Q1 2017. Preliminary data of SAMA s balance sheet indicate that total foreign assets fell by percent to SAR 1, billion in Q1 2017. SAMA s total reserve assets also decreased by percent to SAR 1, billion in Q1 2017.

4 Total bank deposits decreased by percent to SAR 1, billion in Q1 2017. Total assets and liabilities of commercial banks amounted to SAR 2, billion at end-Q1 2017, increasing by percent. Commercial banks claims on the private and public sectors also went up by percent to SAR 1, billion in Q1 2017. Executive Summary (4 ) MONETARY and Banking Developments the riyal and the dollar was approximately basis points in favor of the riyal in Q1 2017, compared to 127 basis points in Q4 2016. As for the riyal exchange rate against the dollar, it remained unchanged at its official peg rate of SAMA also maintained the 90-day repo maturity, in addition to the current overnight, 7 and 28-day maturities, to reinforce stabilized liquidity. As regards foreign exchange swaps, SAMA did not make any swap transactions with domestic banks in Q1 2017.

5 Second: MONETARY Developments Money Supply M3 decreased by percent )SAR billion( to SAR 1, billion in Q1 2017, compared to an increase of percent )SAR billion( in the preceding quarter. It also recorded an annual rise of percent )SAR million( at end-Q1 2017 )Chart 1(. A breakdown of M3 components in Q1 2017 indicates that M1 rose by percent )SAR billion( to SAR 1, billion or percent of M3, compared to an increase of percent )SAR billion( in the preceding quarter. It registered an annual rise of percent )SAR 11 billion( at end-Q1 2017. M2, however, went down by percent )SAR 6 billion( to SAR 1, billion or percent of M3 in Q1 2017 against an increase of percent )SAR 45 billion( in First: MONETARY Policy SAMA has been adopting a MONETARY policy aimed at achieving price stability, supporting the various economic sectors in line with domestic and international economic developments, and assisting domestic banks to perform their financing role in the domestic economy.

6 During the first quarter of 2017, SAMA made some amendments to the instruments of MONETARY policy as follows: Rate of Return and Cash Reserve In Q1 2017, SAMA changed the reverse repo rate from percent to percent, while maintaining the repo rate unchanged at percent. SAMA's daily average repo transactions stood at SAR 164 million in Q1 2017 against SAR 174 million in Q4 2016, while daily average reverse repo transactions amounted to SAR billion in Q1 2017 compared to SAR billion in Q4 2016. The cash reserve ratio was maintained at percent for demand deposits and percent for time and savings deposits. Interest Rates To encourage domestic banks to channel liquidity into lending, SAMA maintained the limit of weekly subscription to treasury bills for domestic banks to SAR 3 billion in Q1 2017.

7 The average three-month SAUDI interbank offered rate )SIBOR( declined to percent in Q1 2017. The three-month interest rate differential between (5 ) MONETARY and Banking Developments billion in Q1 2017, compared to an increase of percent )SAR billion( in the preceding quarter. They recorded an annual rise of percent )SAR billion( at end-Q1 2017. Cash in vault went up by percent )SAR 221 million( to SAR billion, compared to a decline of percent )SAR billion( in the preceding quarter. It registered an annual decline of percent )SAR 614 million( at end-Q1 2017. Third: Developments of SAMA s Balance Sheet Preliminary data of SAMA s balance sheet indicates that total foreign assets fell by percent )SAR 102 billion( to SAR 1, billion in Q1 2017, compared to a q/q decline of percent )SAR billion(.

8 They registered an annual decline of percent )SAR 290 billion( at end-Q1 2017. Net foreign assets declined by percent )SAR 102 billion( to SAR 1, billion in the preceding quarter. It registered an annual rise of percent )SAR 63 billion( at end-Q1 2017. MONETARY Base MONETARY base rose by percent )SAR 289 million( to SAR billion in Q1 2017, compared to a decrease of percent )SAR 2 billion( in the preceding quarter. It registered an annual rise of percent )SAR billion( at end-Q1 2017. A breakdown of MONETARY base components indicates that currency in circulation outside banks decreased by percent )SAR 556 million( to SAR billion in Q1 2017, compared to a q/q decline of percent )SAR billion(. It registered an annual rise of percent )SAR 521 million( at end-Q1 2017.

9 Deposits with SAMA increased by percent )SAR million( to SAR 7008501000115013001450160017501900 Mar - 16 Jun - 16 Sep - 16 Dec - 16 MAR - 17 Mar - 16 Jun - 16 Sep - 16 Dec - 16 MAR - 17 Money Supply Supply Supply 1: Money SupplyBillionRiyal (6 ) MONETARY and Banking Developments )SAR 30 million( during the preceding quarter, recording an annual rise of percent )SAR 98 million( at end-Q1 2017. Reserve Assets SAMA s total reserve assets registered a decline of percent )SAR billion( to SAR 1, billion in Q1 2017 against a decline of percent )SAR 69 billion( during the preceding quarter, recording an annual decrease of percent )SAR billion( at-end Q1 2017 )Chart 3(. A breakdown of the components of total reserve assets in Q1 2017 as compared to the preceding quarter indicates that the reserve position in the IMF dropped by percent )SAR 93 million( to SAR billion.

10 Investments in securities abroad declined by percent )SAR billion( to SAR 1, billion. The balance of special drawing rights increased by Q1 2017 against a decline of percent )SAR 68 billion( in the preceding quarter, registering an annual decrease of percent )SAR 290 billion( at end-Q1 2017 )Chart 2(. Total deposits in domestic currency for foreign entities increased by percent )SAR 58 million( to SAR billion in Q1 2017, compared to an increase of percent 2170211020501982188017001750180018501900 195020002050210021502200 Mar - 16 Jun - 16 Sep - 16 Dec - 16 Mar - 17 Chart 2: SAMA Net Foreign AssetsBillionRiyal05001000150020002500 Mar - 16 Jun - 16 Sep - 16dec - 16 Mar - 17 Mar - 16 Jun - 16 Sep - 16dec - 16 Mar - 17 Total Currency and in Securities 3: Reserve AssetsBillionRiyal (7 ) MONETARY and Banking Developments the preceding quarter, recording an annual rise of percent )SAR billion( at end-Q1 2017.