The Saudi Arabian Monetary Agency, 1952–2016

APPENDIX:INSIDE SAMA

SAMA has been fashioned by the vision of its eight governors. As one or the other of the authors has known personally every governor since the third, Anwar Ali (who took office only six years after SAMA was founded),1 we thought it would be interesting to set out some account of what each man brought to the job, our view of their major achievements and in particular what they were like as human beings. Anwar Ali (1958–74) was a roving spirit, born a British subject in colonial India and later becoming a Pakistani national before moving to the US. He arrived in Jeddah on a temporary assignment from the IMF and fell in love with the country. He effectively re-founded SAMA and championed its independence. As early as 1962, he explained in SAMA’s first Annual Report the mechanism by which the non-oil economy depended on oil income through the multiplier process. Ali established the system of financial supervision that endures to this day. He was a hard worker, and his only relaxation was playing the card game of bridge which requires a strong capacity for mental arithmetic and calculating odds. Ali died in office in 1974, as did his mentor, King Faysal, the following year. Ali relied on his secretary to translate Arabic documents into English, and SAMA’s Investment Deputyship still uses English as well as Arabic as an operational language. When Ali died of a heart attack while visiting Washington DC, the US Embassy in Jeddah sent Secretary of State Kissinger a fine epitaph:

© The Author(s) 2017 301 A. Banafe, R. Macleod, The Saudi Arabian Monetary Agency, 1952–2016, Financial Institutions, Reforms, and Policies in Muslim Countries, DOI 10.1007/978-3-319-55218-7 302 APPENDIX: INSIDE SAMA

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

Anwar Ali’s successor, the first Saudi to fill the top job, was Abdulaziz Al-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 in the US. Before he came to the central bank, he had a number of government roles (including that of minister of state) and gained a reputation as a problem solver. He ran the Saudi railroad system and Dammam port, and then was appointed President of the Civil Service Bureau. In person, he was a skilled manager of people and treated his staff in a friendly way. Al-Quraishi certainly had enough problems to solve. His time in office spanned both oil shocks and saw a huge rise in the size of the foreign exchange reserves. He implemented within a few weeks Ali’s plan to bring in a team of Western advisers and pushed ahead with buying US Treasuries direct, followed by similar deals with the Japanese and Germans. He also began investing in equities worldwide. Critically, in 1981, he extended the maturity 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 creative decisions that were to generate big profits in the decade that followed. His job went beyond dealing with crises and he was committed to empowering Saudis to take charge of their economy. He pushed hard for the Saudization policy that handed the management of the banks over to local investors. His personnel skills showed when he built a housing compound ahead of SAMA’s relocation to Riyadh, which meant that key staff became good neighbors and family friends as well as colleagues. SAMA’s culture today owes him a lot. Al-Quraishi stepped down in 1983 to join his family business, Al-Quraishi Brothers. Hamad Al-Sayari (1983–2009) hails from Dhurma, about fifty miles from Riyadh, and is SAMA’s longest-serving governor, spanning the reigns APPENDIX: INSIDE SAMA 303 of King Fahd and King Abdullah. He had a charming manner and a habit of listening carefully to what was being said, preferring to act cautiously and exert influence behind the scenes. He had an opinion about everything, but was 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 his reading glasses in his hand, his audience would recall that the fifth Governor had begun his career as a teacher. Al-Sayari took a master’s in economics from the University of Maryland. Before specializing in finance and economics, he gained a degree in Sharia. He shifted from a teaching job to work with the quasi- government organizations that invested public money. Following Al-Quraishi’s resignation in 1983, Al-Sayari moved up from Vice Governor to the top job, as Acting Governor until his appointment as SAMA Governor in September 1985. In the 1980s, oil had slumped in price, the government was running budget deficits and the foreign reserves were falling fast. Al-Sayari pegged the riyal firmly to the dollar – a peg that has endured for three decades – and handled the decline in assets adroitly. Undoubtedly the biggest crisis that Al-Sayari had to tackle during his term in office was the Iraqi invasion of Kuwait in 1990. It is testimony to the caliber of the fifth Governor that his swift and effective response to this regional catastrophe led to what was certainly SAMA’s outstanding international achievement. After Al-Sayari had restored confidence in the wake of the original panic in Riyadh, he turned SAMA into an effective substitute for the Central Bank of Kuwait (then in exile) by organizing his fellow governors in the Gulf to defend the Kuwaiti dinar exchange rate and provide whatever liquidity was needed. This violent episode was followed by the long grind of the 1990s when Al-Sayari was responsible for handling both a foreign assets rundown and fast-rising government debt. He stuck firmly to the principle that the bond market should be voluntary, insisting that SAMA should not coerce the banks into buying bonds. When oil prices finally began to turn, a new and more complex set of problems emerged for Al-Sayari – those stemming from Saudi Arabia’s growing involvement in the global financial system. The 9/11 terrorist attacks against US targets in 2001, the stock market crash in 2006, inflation and the start of the global financial crisis all occurred on his watch. He was also the first head of SAMA to grapple with the relatively new phenomenon of critical public opinion. Al-Sayari tried to manage the bubble in stocks by limiting consumer loans; but the market collapse triggered a blame game. 304 APPENDIX: INSIDE SAMA

He found himself in a similar situation with inflation due to higher oil and food prices, but he stood firmly against popular demand to revalue the riyal and fought a long defensive battle which kept the peg in place. Managing matters is less challenging in affluent times, but in a difficult economic climate, decision makers’ skills are truly tested. Al-Sayari stood up to that test. By the end of his term, his skill at crisis management and his pragmatism in quietly transforming Saudi Arabia’s financial infrastructure had made him an internationally respected figure – leading to him being awarded the title of central banker of the year for 2008 by The Banker magazine. Al-Sayari’s successor, Muhammad Al-Jasser (2009–11), a stickler for punctuality, had a commanding demeanor and was active and decisive in everything he did. A fast walker, his staff found difficulty in keeping up with the pace he set. In discussions, Al-Jasser was a sharp talker, who, while he relished dominating the debate, was nevertheless delighted when a good point was made by somebody else. He was stern but could be utterly charming when he chose and enjoyed the complete loyalty of those with whom he worked closely. Al-Jasser hails from the middle of the kingdom, Bureydah, a desert oasis 200 miles north of Riyadh. He and his successor Almubarak were the first governors to see as children how the oil wealth had helped to transform their country into a modern state. Al-Jasser’s early career was peripatetic. After completing his bachelors and master’s program in the USA, he worked at the Saudi Ministry of Finance (1981–83) and then went to the US to get a PhD in economics (1983–86). After only two years back at the finance ministry in Riyadh, he returned to Washington DC to become ultimately an executive director at the IMF. Finally, at 40, he returned permanently and became Vice Governor of SAMA (1995–2009). Al-Jasser’s other achievements in those years included working on the Gas Initiative (1997–98) and serving as a member of the Saudi negotiating team when the country entered the WTO. Within four months of taking office in the middle of the global financial crisis, Al-Jasser had to deal with the biggest corporate failure in the country’s history when the Saad-AHAB groups failed. He moved swiftly to contain the problem, making sure the banks had no other problem loans. By 2010, credit growth had resumed and no Saudi banks had collapsed. Al-Jasser also worked hard on implementing Gulf Monetary Union, but he was probably well aware that politics would make it hard to achieve a common Gulf currency. APPENDIX: INSIDE SAMA 305

Al-Jasser made a powerful contribution to the debate about what had gone wrong with the world’s financial system. He was not afraid to be blunt and controversial, and to explain to the media how the Saudi economy 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 approach for exchange rate management (in short, why switch certainty for uncer- tainty?). Al-Jasser had a good rapport with Al-Sayari when they were at the helm of SAMA affairs, and this lent credibility to the central bank’s decision making on various policy and operational issues. Al-Jasser was in favor of transparency where appropriate, agreeing to provide the IMF with gross figures for SAMA’s foreign exchange reserves, as they were counted toward quota allocation. In 2010, Al-Jasser was honored with the ABANA (Arab Bankers Association in North America) Achievement Award. At the end of 2011, after one thousand days in office and after having piloted the banking system through the greatest world financial crisis in seventy years, he was promoted to become Minister of Economy and Planning. Fahad Almubarak, the next governor (2011–16), had an unconven- tional background. Unlike his six predecessors, he was neither an economist nor a public servant by training, but earned his doctorate in business administration in the United States. He comes from the Eastern Province and rose to wealth and prominence in the world of Saudi finance. After founding his own investment firm, he merged it into Morgan Stanley Saudi Arabia, holding the positions of chairman and managing director. He later moved on to chair the Saudi Stock Exchange (Tadawul) and served for six years on the Shura Council. Almubarak’s appointment reflected the government’s wish to infuse private sector discipline and culture into the public-sector bureaucracy and he focused on mentoring and training SAMA’s staff. Almubarak often said his aim was to move SAMA from good to great, influenced by Jim Collins’ book of the same name. The seventh governor’s style was to encourage staff to interact across the central bank rather than work in separate silos. His aims included the achievement of good time management and staff cohesiveness. Almubarak encouraged emailing for ease and speed 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’s organizational structure, overall strategy, governance, risk management 306 APPENDIX: INSIDE SAMA mechanisms and information systems, along with a complete refining of the investment procedures and processes. Almubarak was a hard worker who put in long hours and had little time for the relaxed habits of some old-timers. He liked to relax by going on long walks. The current Governor, Ahmed Abdulkarim Alkholifey, is the eighth to head the central bank. He succeeded Almubarak in May 2016 in a round of senior changes in the government (which included the appointment of Muhammad Al-Jasser as an adviser to the General Secretariat of the Cabinet). In contrast to his predecessor Alkholifey is a long-time central banker who has served in a variety of positions at SAMA since 1995. A native of Riyadh, he took a degree in law from King Saud University in 1987 and joined the Ministry of Petroleum and Natural Resources as a legal adviser. He studied in the US, gaining a Master’s degree in Economics in 1993 and two years later he joined SAMA as an economist. He continued his academic work and was awarded a PhD and MBA in Business Administration and Economics in 2000. By 2002 he had a director-level post at SAMA and was appointed Director General of Research and International Affairs in 2010. The following year Alkholifey was seconded to the IMF as an executive director, and when he returned to SAMA in 2013 he became a Deputy Governor. Alkholifey served on the technical committee of the Islamic Financial Services Board until 2015, so he is familiar with issues concerning Islamic finance. He has also been on the board of SAGIA for some years. Under him the Research Department started to publish academic papers on subjects such as exchange rate policy, inflation forecasting, the output gap in the economy, the Saudi stock market and challenges to economic diversification. His main priority is to maintain monetary stability and make sure that SAMA fully supports the ideas of ‘Vision 2030.’

SAMA Board of Directors 2016 1. Governor Dr. Ahmed Alkholifey, Chairman 2. Vice Governor Abdulaziz Alfuraih, Vice Chairman 3. Hamad Al-Sayari 4. Abdulaziz Al-Athel 5. Khalid Al-Juffali

N.B. At the time of SAMA’s creation in 1952, the Minister of Finance was the Chair of SAMA’s Board, and his deputy was the Vice Chair. SAMA’s charter was amended in December 1957 to emphasize its autonomy, APPENDIX: INSIDE SAMA 307 making the Governor and the Vice Governor the Chair and Vice Chair of the Board. At the same time, the Board was assigned the appropriate powers to ensure sound management.

SAMA Senior Management at the end of 2016 Governor: 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. Fahad Alshathri (July 2016) Deputy Governor for Supervision: Ahmed Alsheikh (November 2016) Former Governors Fahad Almubarak 2011–16 Muhammad Al-Jasser 2009–2011 Hamad Al-Sayari 1983–2009 Abdulaziz Al-Quraishi 1974–1983 Anwar Ali 1958–1974 Ralph Standish 1954–1958 George Blowers 1952–1954 Former Vice Governors Post vacant 2013–2014 Abdulrahman Al-Hamidy 2009–2013 Muhammad Al-Jasser 1995–2009 Ibrahim Al-Assaf July 1995–Oct 1995 Ahmed Al-Malik 1988–1995 Post vacant 1983–1988 Hamad Al-Sayari 1980–1983 Khalid Al-Gosaibi 1972–1980 Junaid Bajunaid 1963–1972 Abed Sheikh 1958–1963 Ma’touk Hasanain 1954–1958 Ralph Standish Sept 1954–Nov 1954 Rasem Al-Khalidi 1952–1954 308 APPENDIX: INSIDE SAMA

NOTES 1. The ﬁrst two Governors were George A. Blowers (1952–54) and Ralph Standish (1954–58). 2. From Jeddah Embassy to Secretary of State: SAMA after Anwar Ali, November 13, 1974. Canonical ID: 1974jidda06631_b. Accessed online at www.wikileaks.org. GLOSSARY

Active investment management Use of human or computer skills with the aim of out-performing after fees the return on an investment benchmark. Appreciation A gradual increase in the value of a currency in response to market demand rather than by an ofﬁcial revaluation. Arbitrage The process of taking advantage of the existence of different prices for the same product (or its substitute) at the same time but in different markets. Basel Standards Recommendations on banking regulations to improve the regulation, supervision and risk management of ﬁnancial institutions issued by the Basel Committee on Banking Supervision operating under the auspices of the Bank for International Settlements (BIS). In historical 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 percentage return on an index of securities over the same period to see whether they 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 a currency or deposit. Black Market An unlicensed market, normally illegal, in an asset or currency. Black market prices will normally be substantially higher

© The Author(s) 2017 309 A. Banafe, R. Macleod, The Saudi Arabian Monetary Agency, 1952–2016, Financial Institutions, Reforms, and Policies in Muslim Countries, DOI 10.1007/978-3-319-55218-7 310 GLOSSARY

than official prices for the same asset, but while the asset is rationed in supply 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 bearer or holder. It is usually a negotiable instrument with a fixed interest rate and 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 international monetary system which prevailed through 1971. This system is generally known as the ‘Bretton Woods System’ and was a fixed exchange rate system with some capital controls. Broker A broker brings buyers and sellers together for a fee for this service. Brokers do not take a position as principals themselves, they only arrange for transactions among other parties as agents. BSDA Bankers Security Deposit Account. A now-defunct non-negotiable instrument issued by SAMA to the banks as a way of mopping up excess liquidity. Now replaced by Central Bank Bills. Budget Deficit A situation in which the government budget spends more than it receives as revenues in the same timeframe. Also called a fiscal deficit. Budget Surplus A situation in which the government budget spends less than it receives as revenues in the same timeframe. Also called a fiscal surplus. Bull Market A rising market or a period of optimism when increases in market prices are anticipated. Capital Controls The regulation of foreign exchange transactions by a government or central bank to avoidanexcessiveexpansionofthe local money supply or depletion of the country’s foreign exchange reserves. Such controls are usually imposed when a country has unde- sirably large capital inflows or outflows. Also known as Exchange Controls. Central Bank A bank acting on behalf of a country’s government with the right to issue the country’s currency and with responsibilities which may include the management of the country’s money supply, short- term interest rate levels and availability of credit. It may also manage the level of the country’s foreign exchange reserves and seek to control the external value of its currency. Central Bank Bill A negotiable instrument, typically with a maturity of less than a year, issued in domestic currency by the central bank to the GLOSSARY 311

banks in the financial system. The aim is to mop up excess liquidity on issuance, and to adjust liquidity by varying the issuance size or allowing the 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 exchange swaps with each other to inject or withdraw liquidity from the domestic money 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 product that pools together cash flow-generating assets and repackages this asset pool into discrete tranches carrying different risks that can be sold to investors. 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 interest payments and principal in full and on time. The principal rating agencies are Standard and Poor’s (S&P), Moody’s and Fitch. An S&P rating of AAA is the highest possible rating for a bond or currency, and credit quality declines as the alphabet is gone through. Credit Risk In lending operations, the likelihood that a borrower will be unwilling or not able to repay the principal or pay the interest on time. Currency Peg A situation where the central bank holds the foreign exchange value of a currency constant against another currency (such as the dollar). The typical arrangement is a promise by the central bank to buy or sell unlimited amounts of the dollar for the local currency. Current Coupon (1). In fixed rate securities, a coupon rate which approximates 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 interest period. 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 borrowings which must be made by the borrower in the period during which its debt is outstanding. A debt service ratio compares these payments to some other number (e.g. exports in the case of a sovereign borrower in foreign currencies, or to GDP in the case of a sovereign borrower in its own currency). 312 GLOSSARY

Depreciation A gradual decline in the value of a currency in response to trends in demand and supply rather than by an ofﬁcial devaluation. Developed Market A developed country, in which investment would be expected to achieve lower returns than in an emerging market but accompanied by lower risk. The United States and United Kingdom are developed markets. Dollarization The process by which the money supply in a country comes to consist of a mixture of local currency and foreign currency (typically, dollars) because economic participants in the country prefer not to take the risk of devaluation of the local currency. In an extreme situation, the dollars are used exclusively. Duration Dependence Positive duration dependence is when the likelihood of an event is more likely given the passage of time. Negative duration dependence is when the event is less likely given the passage of time. No duration dependence is when the likelihood of an event is independent of the passage of time. See also Random Walk. Duration-Neutral Switch or Swap Duration measures the amount by which the price of a bond changes in response to a given move in its yield to maturity (YTM). A duration-neutral switch is where the buyer sells a bond with a given YTM and buys a bond of the same credit risk but with a higher YTM, thus improving his return to maturity. Emerging Market A developing country, in which investment would be expected to achieve higher returns than in a developed market but be accompanied by greater risk. Saudi Arabia is an emerging market. Eurodollars Dollars belonging to non-residents of the United States invested in external money markets. Eurodollar settlements are made over a banking account in the US and form part of the US money supply. Eurodollars are not subject to the same regulations as domestic dollars. External Managers External money managers are third parties to whom an institution such as a central bank out-sources the management of its assets, such as equities and bonds. Equity Investments Generally refers to the buying and holding of shares or stock on a stock market by individuals and ﬁrms in anticipation of income from dividends and capital gains, as the value of the stock rises. Equities are known in the United States as stocks and in the United Kingdom as shares. Forward Foreign Exchange Transaction A foreign exchange settlement later than spot rate (i.e. at a settlement date beyond the nearest settlement date) at a pre-determined rate, calculated as the spot rate, GLOSSARY 313

plus the swap rate based on the interest rate differential between the two currencies. Government Development Bond (GDB) A coupon-paying bond in local currency issued by the government of Saudi Arabia. Hedging An arrangement whereby the risk of holding an asset is offset by holding another asset. For instance, an American investor holding a Japanese bond while engaged in a forward foreign exchange transaction by selling the yen forward against the dollar is hedging the currency risk in the yen. Internal Managers Staff directly employed by an institution such as SAMA to manage its assets such as equities and bonds. Investment Benchmark A standard against which the performance of an actively managed security portfolio or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose. Under-performance of a benchmark 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 as margin, to increase the potential return of an investment. In business terms,theamountofdebtusedtofinance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged. A bank is typically very highly leveraged compared to other businesses. Liquidity In a multicurrency-investment portfolio the liquidity of a given foreign currency has to be viewed in terms of exchange liquidity and instrument liquidity. Exchange liquidity depends upon the ease with which a currency can be converted into and out of another major currency. Instrument liquidity depends upon the ease with which a negotiable instrument denominated in that currency can be purchased and sold without noticeably affecting the market rate for that instrument. Both types, exchange liquidity and instrument liquidity, deter- mine the overall liquidity of a given currency in a portfolio. In domestic currency situations, liquidity generally refers to instrument liquidity. The global financial crisis of 2008–09 was notable for the drying up of liquidity across a range of markets. Loan to Deposit Ratio (LDR) A measure of the ratio of the volume of lending (assets on the balance sheet) by a bank compared to the deposits (liabilities on the balance sheet). An LDR below 100 percent indicates loans are less than deposits. A regulatory tool used by SAMA 314 GLOSSARY

on the basis that the lower the LDR the less risky are the operations carried out by the bank. London Interbank Offered Rate (LIBOR) This rate is often used as the basis for pricing Eurodollar loans. The lender and the borrower agree to a markup over LIBOR, and the total of LIBOR plus the market makes the effective interest rate for the loan. Typical LIBOR periods are one month and six months. Long ‘Going long’ is the market term for buying a security or currency in anticipation of a rise in price. An example is buying a currency in anticipation of an upward revaluation. Money Market Instruments The most popular money market instruments are Treasury Bills (or the equivalent in local currency), commercial paper, bankers’ acceptances and certificates of deposit. Offer Rate The price at which a quoting party is prepared to sell or provide 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 it is doing business. An offshore market is a market outside this jurisdiction Open Market Operation Open market operations are conducted by a central bank in its domestic money market to reduce or increase the money supply and hopefully alter liquidity conditions. For instance, the purchase of government bonds will increase the money supply and improve liquidity as the central bank pays cash for the instrument. Conversely, selling government bonds will decrease the money supply and reduce liquidity in the market. Repurchase agreements are typical money market operations. Optimal Currency Area A geographical region in which it would improve economic efficiency to have the entire region share a single currency. Passive Investment Management Holding a basket of securities to closely follow the return on a benchmark without using human or computer skills. Project Finance The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure, in which project debt and equity used to finance the project are paid back from the cash flow generated by the project. Toll highways are typical examples of projects financed in this way. GLOSSARY 315

Purchasing Power Parity (PPP) Theory A theory which assumes that in the long run exchange rates adjust to reflect the relative inflation rates of the two currencies. PPP can be difficult to estimate when the goods and services consumed are very different in each country. Random Walk The observation that many asset prices such as oil follow no discernible pattern or trend. See also Duration Dependence. Repurchase Agreement Commonly known as a Repo. A contract in which the seller of an asset (say, a government bond) agrees to buy it back on a specific date. This technique is frequently used for raising short term liquidity by dealers to finance their positions. Central banks use repos to increase liquidity in the financial system. Reserve Requirement An amount of money (usually a percentage of deposits) which commercial banks in a country are required to keep on deposit with the central bank. Originally, these requirements were designed to protect the solvency of banks. Today, central banks, espe- cially in emerging markets, adjust requirements principally as a tool to affect 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 contract in which the buyer of an asset agrees to sell it back on a specific date. Central banks use reverse repos to withdraw liquidity from the financial 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 prohibition on paying or receiving interest. Often known as Islamic instruments. Short ‘Going short’ is the market term for selling a security or currency which the investor does not hold, typically promising to deliver it at a future time. An example is selling a currency short in anticipation of a devaluation. Short Covering The purchase by an investor of a security or currency previously sold short in order to deliver them and thereby to close out his short position. Soft Deposit Money placed by the central bank with a local bank on concessionary terms (generally by a lower interest rate than the market interest rate) in order to help the bank through a difficult period. 316 GLOSSARY

Sovereign Risk The risk that the government of a country may interfere with the repayment of a debt. This can happen when a borrower is willing to repay a loan in local currency, but the government may not allow him to repay the loan to a foreign bank because of a lack of foreign exchange or for political reasons. The sovereign government itself may be unwilling to pay a loan taken out in foreign currency. In an extreme situation, there may be a sovereign debt default. Special Drawing Right (SDR) A composite fiduciary reserve asset (only an entitlement to credit) created in 1970 by the IMF as a supplement to existing reserve assets. The SDR is worked out from a basket of fixed amounts of major trading currencies. The SDR has failed to make headway 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 States and known as a US Treasury, or simply as a Treasury. Instruments that are shorter than a year and pay no coupon are Treasury Bills. See Zeros. Yield Curve A graphical representation of yield to maturity (YTM) for each different maturity of a financial instrument, such as US Treasuries. Time to maturity is represented on the horizontal axis. When longer maturities have higher YTM than shorter maturities, which is the situation most of the time, the curve is called a positive, upward-sloping or normal curve. The opposite type of curve is called a negative, down- ward-sloping or inverted yield curve. When YTM is the same for all maturities it is called a flat yield curve. Yield to Maturity (YTM) The return a security earns on the price at which it was purchased if it is held to maturity. This is a function of coupon 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. Securities issued in the primary market at a discount to their principal amount at final maturity, with no coupons attached and paying no income, so that the return consists entirely of capital gain with no reinvestment risk. Treasury and Central Bank Bills are zeros, normally with a max- imum maturity of one year. INDEX

A Ali, Anwar, 34, 39, 42, 43, 47, Abdulaziz, Abdullah bin, King 50–55, 61, 75n6, 251, 2005-15, 136, 160, 186, 253 289, 301–302 Abdulaziz, Fahd bin, King 1982- Al-Jasser, Muhammad, 13n1, 144, 2005, 77, 97, 136, 147, 162, 150, 162, 204, 233, 186, 210n4, 251 304–305, 307 Abdulaziz, Faysal bin, King Al-Jazira Bank, 48n3 1964-75, 21, 33, 35, 37, 38, 41, Al-Juffali, Khalid, 306 42, 47, 50, 63, 246, 250 Alkholifey, Ahmed, 162, 190n1, Abdulaziz, Khalid bin, King 1975-82, 77 298, 306 Abdulaziz, Salman bin, King 2015- Almubarak, Fahad, 147, 162, 163, present, 298 287, 288, 304, 305–306, 307 Abdulaziz, Saud bin, King Al Rajhi Bank, 10, 70, 72–73, 1953-64, 21, 27, 28, 29, 125–126, 129, 140, 153, 30, 36, 38 267, 281 Active investment management, 309 Al Saud, Abdul Aziz, King 1932-53, Ahkdar, Farouk, 50 18, 19, 20, 21, 27, 28, 29, 30, Ahmed Hamad Al-Gosaibi & Brothers 31n2, 33, 36, 38, 64, 187, 245, (AHAB), 151–153, 163, 265, 246, 294, 298 270, 274, 277, 279, 284 See also Ibn Saud Al-Athel, Abdulaziz, 306 Alshathri, Fahad, 307 Aldossari, Fahad, 307 Alsheikh, Ahmed, 307 Abdullatif, Ahmed, 54, 59, 60, 85, Alsayari, Ayman, 92, 210n4 197, 307 Alfuraih, Abdulaziz, 288, 306 America, see United States Alfuraih, Ahmed, 306 Arab League boycott, 94 Alhekail, Hashem, 307 Arab Monetary Fund (AMF), Alhumaidah, Fahad, 211 169, 171

Aramco, 3, 9, 13n4, 23, 24, 25, 26, Basel standards 27, 40, 44, 51, 56, 59, 88, 151, Basel I, 309 245, 291 Basel II, 265 nationalized, 40, 44, 59 Basel III, 141, 267, 270, 276, part-privatization planned under 283, 284n7 Vision 2030, 3, 291, 294 Basket, Band and Crawl (BBC) Asia exchange rate regime, 242 ﬁnancial crisis of 1997-1998 in, 7, BCBS (Basel Committee for Banking 111, 114, 120, 121, Supervision), 309 149, 230 Berger, Tom, 84, 210n3 Saudi oil market in, 256, 258 BIS (Bank for International tilt to, 291 Settlements), 131, 177 Association of East Asian Nations Black, Bill, 89, 93, 95, 98, 99, (ASEAN), 173, 179, 183, 189 102, 210n3 Black market rate for US dollars, 36–39, 42 B Blowers, George, 28, 35, 36 Bahrain, 22, 63, 70, 96, 151, 152, Bond market 170, 171, 177 primary, 220, 222, 223 Balance of payments, 5, 50, 119, 227 secondary, 139, 214, 215, 220, Banafe, Ahmed, 5, 13, 14, 107, 221, 223 233, 244n5 Bonds, 8, 42, 46, 50, 52, 55, 57, 58, Bank of England, 55, 75n6, 92 59, 64, 66, 67, 70, 73, 79, 86, 87, – Bankers’ Security Deposit Account 90, 93, 99, 100, 107 108, 115, (BSDA), 96, 97, 98 116, 118, 119, 121, 124, 132, – Banking, see Conventional/Western 139, 140, 141, 148, 156 160, – banking; Shariah-compliant 163, 185, 195 199, 202, 204, – banking 205, 207, 209, 214 223, – Banking Dispute Settlement 251 253, 256, 270, 274, 282 Committee, 153 swapping, 87, 99, 158 See also Saad-AHAB affair Bond yields, 66, 93, 156, 157, Banking regulation, 187, 280 195, 208 Banking Vision 2020, 274 Bretton Woods conference in 1944, Bank for International Settlements 310 (BIS), 131, 177 Bretton Woods monetary system, 246, Bank of Japan, 58, 61 248, 249 Bankruptcy code, 152 British Aerospace, 90 ’ Baring Brothers, 54, 55, 79, 195 BSDA (Bankers Security Deposit Basel Committee for Banking Account), 96, 97, 98 ﬁ Supervision (BCBS), Budget de cit, 4, 5, 27, 37, 69, 80, 309 82, 116, 129, 163, 220, 270 INDEX 319

Budget policy, 9, 41, 45, 52, 69, Chile, 238, 240 154, 182, 220, 227, 238, China 239, 265 renminbi currency in, 242, 249, See also Fiscal policy 256–261 Budget surplus, 5, 39, 68, 69, 97, Saudi market in, 25, 146, 194, 175, 228 246, 253, 256, 258, 259, Bundesbank, 61 260, 270 Bush, George H. W., 135 voluntary export surpluses, 194 Business cycles, as synchronized and Collateralized debt obligation unsynchronized in Euro Area and (CDO), 148 GCC, 179, 180, Consumer Protection Principles, 182, 183 Saudi, 275 Conventional/Western banking, 7, 8, 10, 18, 35, 49, 51, 69, 70, C 125, 126, 127, 148, 150, California Arabian Standard Oil 156, 161, 162, 185, 194, Company (CASOC), 23 207, 218, 219, 222, 254, See also Aramco 276, 281–283 Capital Adequacy Ratio (CAR), 270, Cooperative Insurance Regulations, 263 272, 284n7 Cost-push inflation, 142 Capital controls, 10, 35, 38, 39, 42, Council on Economic and 71, 107, 255, 256, 258, 259, 260 Development Affairs in Cyprus, 255 (CEDA), 163n4 Capital Market Authority Credit criteria for SAMA’s (CMA), 130, 137, 217, investment, 202, 206 263, 289 Credit rating agencies, 159, Carter, Jimmy, 66 202, 205 CASOC (California Arabian Standard Crises Oil Company), 23 Asian financial crisis of 1997- See also Aramco 1998, 7, 111, 114, 120, 121, CDO (collateralized debt 149, 230 obligation), 148 Cyprus banking crisis of 2013, 255 CEDA (Council on Economic and Greek crisis in 2010, 178 Development Affairs), 163n4 Mexican crisis of 1982, 71 Central bank bills, 97, 107, 141, 215, oil crisis in 1973-75, 33, 68, 128 216, 217, 244n4 oil crisis in 1979-81, 227 control of system liquidity, See also Global financial crisis of 216, 217 2008-2009 See also Saudi Arabian Monetary Currency Law, 195, 200, 233 Agency (SAMA) Currency peg, see Peg, currency Chase Manhattan Bank, 56 Cyprus, 255 320 INDEX

D E Dammam, Saudi Arabia, 23, 25, 44, EC (European Commission), 171, 72, 104 210n1 Debt ECB (European Central Bank), 125, CDO, 148 149, 175, 176 DMO, 215, 223 Economic Development Fund domestic, 5, (EDF), 41 96, 97 Egypt, 19, 35, 36, 37, 41, 49, 63, foreign currency, 98 105, 245 low debt, 180 End of service benefits (ESB), 221 Debt episodes, Saudi, see Bankers’ Equities, 52, 57, 68, 116, 117, Security Deposit Account; 205, 207 Floating rate notes; Government See also Tadawul (Saudi Stock Development Bonds; Saudi debt Exchange) episodes Equity managers, 93, Debt Management Office 95, 96 (DMO), 215, 223 ESB (end of service benefits), 221 Demand-pull inflation, 66 Euro, 140, 170, 172, 173, 174, 176, Dependency, 3, 177, 178, 180–185, 187, 6, 298 189–190, 248, 249, 255, 256, See also Diversification 258, 260, 261n6 Deutschmark, German, 59, numeraire status, 249, 257–258 61, 67 Euro Area, 140, 174, 178, 180, Development plans, 3 181–185, 189, 190, 248, 255, See also Five Year Plans 258, 261n5 Diraiyah, 63, 84 declining market for Saudi oil, 77 Disintermediation, 220 Eurodollars, 58, 66, 91, 118, 157, 312 Diversification, 3, 47, 61, 64, 68, European Central Bank (ECB), 125, 106, 112, 137, 146, 186, 149, 175, 176 188, 190, 198, 199, 202, European Commission (EC), 171, 207, 225, 241, 258, 210n1 294, 298 European Union (EU), 171 See also Dependency Europe, Western, 256, 291, 292 Domestic-Systemically Important Exchange rate, 9, 10, 26, 36, 37, 38, Banks (D-SIBs), 276, 279 45, 59, 61–63, 102, 103, 120, Dubai, 135, 137, 140, 150, 151, 153, 121, 132, 142, 143, 170, 172, 169, 185, 193 177, 180, 187, 188, 199, 222, Dubai World bankruptcy, 153, 185 226, 231–239, 241, 242, 243, Duration dependence, 110, 248, 249, 253, 255, 256, 260, 111, 297 295, 297 See also Roulette wheel, Random walk See also Peg, currency INDEX 321

Expatriate labor, 4, 25, 83, 112, 132, Ford, Gerald R., 49 142, 181, 229, 294, 295 Foreign direct investment (FDI), 132, See also Foreign workers 146, 241 Foreign exchange reserves gold, 41, 44, 46 F losses, 72, 79 Fairbrother, Jeremy, 85, 86, 89, outflows, 5, 56, 79, 83, 86, 90, 295 210n3 profits, 39, 230 FDI (foreign direct investment), 132, See also 90 percent solution 146, 241 Foreign workers Fed (US Federal Reserve Board), See Green Card system for, 294–295 US Federal Reserve Board (Fed) remittances from, 4, 9, 111, 112, Federal Reserve System, 133n1 200 See also US Federal Reserve Board statistics for, Finance ministers, 18, 20, 26, 30, 36, 119, 142 37, 38, 43, 47, 55, 89, 99 tasattur, 112 Finance Ministry, 5, 21, 25, 26, 28, See also Expatriate labor 35, 37, 38, 56, 68, 96, 97, 100, FRN (floating rate notes), 115, 111, 113–115, 132, 139, 140, 214, 223 141, 161, 174, 215, 297 Finances, 5, 7, 20, 22, 24, 25, 26, 30, 39, 40, 47, 82, 99, 101, 103, G 106, 110, 118, 128, 139, 197, GCC (Gulf Cooperation 213, 214, 251 Council), 172, 174 Saudi and US compared, 7, 40, 82, GDBs (Government Development 101, 128 Bonds), 115, 214, 215, 222, 223 Financial Stability Report of GDP (gross domestic product), 3, 81, SAMA, 271, 279, 280 121, 136, 170, 227, 267, 293 First National City Bank, 48n4, 72 General Organization for Social See also Saudi American Bank; Insurance (GOSI), 99 Wriston, Walter General Reserve Account, 52, 98, 100, Fiscal policy, 9, 45, 62, 131, 144, 170, 116 234, 247 Germany, 52, 59, 68, 87, 153, 175, fiscal rule, 186, 238, 295, 185, 195 296, 297 Global financial crisis of 2008- See also Budget policy 2009, 137, 141, 145, 148, 154, Fitch Ratings, 159, 202 162, 163n3, 180 Five Year Plans, 51, 61, 64, 80 185, 186, 193, 204, 205, 232, 243, See also Development plans 254, 270, 289 Floating rate notes (FRN), 115, GMC (Gulf Monetary Council), 214, 223 176, 186 322 INDEX

GMU (Gulf Monetary Union), 140, Hawes, Tony, 60, 61, 210n3 169, 170 Hejaz, 18–21, 31n1 Gold Home mortgages, 160, 161, 186, counterfeit coins, 35–36 267, 280 in foreign exchange reserves, 41, Housing shortage, 160 44, 46 Al-Hamidy, Abdulrahman, 288, 307 Saudi coinage, 21, 22, 25, 26 Hussein, Saddam, 78, 101, 135, Gold standard, 22, 25, 29, 44 169, 171 GOSI (General Organization for Social Insurance), 99 Government Development Bonds I (GDBs), 115, 214, 215, Ibn Saud, 2, 18, 30, 31n2, 245, 246, 222, 223 294, 298 Government Pension Fund Global See also Al Saud, Abdul Aziz (GPFG) [Norway], 209 IDB (Islamic Development See also Sovereign Wealth Fund Bank), 171 Government spending, 2, 4, 5, 9, 11, IEA (International Energy 33, 38, 39, 41, 44, 62, 64, 67, 74, Agency), 146 79, 82, 84, 87, 114, 118, 119, IFSB (Islamic Financial Standards 130, 141, 154, 242, 268, 270, Board), 127 283, 295 Imported-inﬂations, 45, GPFG (Government Pension Fund 242, 243 Global) [Norway], 209 Inﬂation See also Sovereign Wealth Fund cost-push, 142 Greek crisis in 2010, 178 demand-pull, 66 Green Card system, 294–295 imported, 45, 242, 243 Gross domestic product (GDP), 3, 81, pass-through, 59 121, 136, 170, 227, 267, 293 Saudi, 13n8, 225, 226 Gulf banknote, 170, 172, 187, 189 US, 57, 66, 118, 132, Gulf Cooperation Council 149, 208 (GCC), 172, 174 Informal expatriate business owners Gulf Monetary Council (GMC), (tasattur), 112 176, 186 Ingrams, Leonard, 54, 55, 57, 61, 66, Gulf Monetary Union (GMU), 140, 85, 96, 210n3 169, 170 Institute of Banking (IOB), 288 Gulf War in 1991, 78, 105 Institute of Finance (IOF), 288 See also Khafji Insurance Cooperative Insurance Regulations, 263 H GOSI, 99 Hashemite Kingdom of Jordan, 41, NCCI, 122 48n3, 171 Saudi Deposit Insurance Fund, 267 INDEX 323

The International Banking scholars of, 122, 282 Corporation (TIBC), 151 Shariah law, 7, 126, 127, 160, 161, See also Saad-AHAB affair 281–283 International Energy Agency See also Shariah-compliant banking (IEA), 146 Islamic Development Bank International Monetary Fund (IMF) (IDB), 171 Article 4 reviews, 173 Islamic Financial Services Board FSAP, 133n6, 163n1 (IFSB), 127 Saudi Arabia seat on Executive Board of, 252 International Monetary System, 68, J 245, 246, 248, 249, 252, 253, Japan, 52, 57, 58, 61, 68, 87, 90, 104, 255, 258, 259, 260, 261n6 157, 195 numeraire in, 246, 249, 258, Bank of Japan, 58, 61 259, 261n6 Memoranda of Understanding Investment Department of SAMA with, 195 (Investment Deputyship), 45, 54, yen, 58, 61, 67, 249, 260 56, 92, 93, 94, 99, 111, 115, Jeddah, Saudi Arabia, 17, 19, 20, 21, 196, 210n4, 211n6, 213, 287 23, 24, 26, 28, 29, 30, 33, 35, 36, Investment portfolio (IP), 195, 38, 43, 52, 54, 57, 58, 59, 60, 63, 199, 200 64, 73, 92, 93, 96, 103, 160, Investment process, 197, 198 171, 213, 245 IOB (Institute of Banking), Jordan, Hashemite Kingdom of, 41, 288 48n3, 171 IOF (Institute of Finance), 288 IP (investment portfolio), 195, 199, 200 K Iran Kandara Palace Hotel, 54 Iran/Iraq war, 64, 78, 79, 106, Keynes, John Maynard, 4, 248, 259 128, 171, 251 See also Bretton Woods monetary Khomeni and, 64 system revolution and second oil crisis in, 1, Khafji, 77, 78, 104 171, 251 See also Gulf War in 1991 Iraq Al-Khatib, Mohammed Omar, 130, Hussein, Saddam, 78, 101, 135, 210n4, 213–214 169, 171 Khasanah Nasional, 221 Iran/Iraq war, 64, 78, 79, 106, Khomeni, Ayatollah, 64 128, 171, 251 King Abdullah Financial District, Islam 186 money in, 18 Kissinger, Henry, 49, 54 Quran, 7, 18 Kuwait riba, 7, 8, 28, 30 currency peg, 150, 187 324 INDEX

Kuwait (cont.) Ministry of Commerce and dinar, 102, 103, 104, 169, Industry, 217 170, 175 Ministry of Housing, 161 Gulf War in 1991, 78, 105 Minter, Jonny, 60, 61, 210n3 Monetarism, 70 Monetary Authority of Singapore L (MAS), 242 Lawrence, T. E., 20 Monetary Policy, 9, 20, 22, 70, 79, LCR (liquidity coverage ratio), 141 131, 176, 179, 182, 183, 184, – LDR (loan to deposit ratio), 234, 190, 210n4, 215, 216, 225 227, 266, 294 232, 233, 241, 242, 251, Lehman Brothers, 137, 149, 185 278, 289 LIBOR (London Interbank offered Monetary trilemma, 226, 248 rate), 115 Monte Carlo effect, 109 Libya, 2, 44, 194 See also Random walk, Duration Liquidity coverage ratio (LCR), 141 dependence ’ Loan to deposit ratio (LDR), 234, Moody s Investors Service, 202 266, 294 Morgan Guaranty Trust, 23 Loans Morgan Stanley Saudi Arabia, 147 LDR, 234, 266, 294 Mortgages, home, 160, 161, 186, long-term, 70, 99, 122, 147, 151, 267, 280 222, 268, 269 Mulford, David, 54, 55, 57, 59, 66, NPLs, 126, 265 75n7, 84, 210n3 offshore, 70, 71, 151, 152 Multiplier, 4, 39, 82, 83, 111 SAMA loans to IMF, 161 See also Keynes, John Maynard short-term, 51, 151, 246, 252 Mundell, Robert, 178 London Interbank offered rate Muscat agreement, 174 (LIBOR), 115 Mutual funds, 128, 129, 219, 221, 274

M N Macroprudential policy, 277, 278 Naira (Nigerian currency), 236 Makkah, Saudi Arabia, 18, 19, 36, 65 National accounts, 3, 4 Al-Malik, Ahmed, 85, 102, 210n4 National Commercial Bank Mandelson, Peter, 193, 210n1 (NCB), 42, 72, 273 Al-Manakh affair, Souk, 74 National Company for Cooperative MAS (Monetary Authority of Insurance (NCCI), 122 Singapore), 242 Netherlands Trading Company, 21, Memoranda of Understanding, 195 23, 29, 42, 48n3 Mexico, 71, 131, 237, 251, See also Saudi Hollandi Bank 252, 253 Nigerian currency (naira), 236 INDEX 325

9/11 attacks, 128 market, 2, 74, 102 90 percent solution, 4, 5, 6, 57, 79, price of, 2, 4, 6, 7, 8, 12, 44, 47, 50, 80, 83, 89, 98, 106, 118, 119, 51, 58, 61, 63–68, 74, 78, 81, 130, 131, 296 88, 90, 101, 102, 106, 107, See also Foreign exchange reserves 109, 110, 111, 113, 114, 120, Nixon, Richard M., 49 133n1, 135, 137–139, 142, Non-oil economy, 3, 13n4, 80, 83, 149, 150, 154, 157, 163, 172, 122, 138, 153, 214, 232, 234, 175, 182, 194, 213, 214, 226, 279 227, 228, 229, 230, 232, Non-oil revenues, 3, 81, 291, 234–237, 239, 241, 243n2, 295, 299n5 251, 253, 256, 260, 264, Non-performing loans (NPLs), 265, 268, 270, 273, 279, 126, 265 280, 283, 291, 293, 294, Norway, 153, 193, 195, 205, 225, 295, 296, 297 238, 239, 241, 296 revenues from, 3, 4, 5, 6, 8, 26, 35, fiscal arrangements, 238 36, 39, 40, 41, 44, 47, 51, 61, See also Government Pension Fund 78, 79, 81, 88, 93, 102, 106, Global 113, 114, 116, 118, 119, 121, Numeraire 142, 145, 186, 227, 291, 295 dollar and, 246 shale, 2, 256, 291 Euro and, 249, 257–258 See also Random walk; Duration in International Monetary dependence System, 246, 249, 258, 259, Oman, 171, 175, 178, 182 261n6 OPEC (Organization of the multipolar view of, 257 Petroleum Exporting renminbi and, 249, 256–261 Countries), 250 twin functions of, 246 Optimal currency area high fiscal transfers, 180 O labor and capital mobility, 180 Offshore banking units (OBUs), 63, low debt, 180 71, 96, 97 open economy, 179, 180 See also Bahrain suitability of GCC members Oil for, 172, 174, 182, 186, 188, crisis in 1973-75, 33, 68, 128 237 crisis in 1979-81, 227 synchronized business cycles, 179, curse and blessing, 298 180, 182, 183 fl diversion of exports to domestic wage and price exibility, 179, 180 use, 294 Organization of the Petroleum economy, 2, 3, 13n4, 80, 83, 122, Exporting Countries 138, 153, 214, 227, 232, 234, (OPEC), 250 ‘ ’ 279 Original sin, 187 326 INDEX

P Quasi-government funds, 99, 100, Palais Royale Initiative, 259, 260 115, 116, 120, 123, 220, 263 Passive investment management, 195, Quran, 7, 18 203, 205 See also Islam Pass-through inflations, 59 Peg, currency R credible, 83, 236, 237, 241, Rabigh, Saudi Arabia, 147, 148 243 Random walk, 6, 109, 133n1, 214, GCC countries to dollar, 235, 236 240, 297 Kuwait, 150, 187 See also Roulette wheel; Duration unvarying, 231 dependence varying, 231, 236 Ras Tanurah oil refinery, 24, 27 See also Exchange rate Reagan, Ronald, 65 Performance Measurement, 205, 206 Real Estate Development Fund Petrodollars (REDF), 160, 161, 263 oil crises and, 68 Real Estate Financing recycling, 49, 50, 51, 73, 75n9, Corporation, 161 249, 250 Real estate investment, 207 Pilgrim receipts, 36, 225 Recycling, 49–51, 73, 145, 248, 249, Plaza Accord in 1985, 68, 87 250 Population statistics, 9, 112, 129, See also Petrodollars 275, 294 Regulations See also Foreign workers; Expatriate banking regulations, 187, 280 labor Banking Vision 2020, 274 Price-elasticity of demand, 229, 232 foreign assets, 162, 163, 217, 233, Primary dealers, 214, 222, 223 263 Private placements, 57, 60, 100, 185, Renminbi, 242, 249, 256–261 195, 217 Repurchase (repo) facility, 107 Producer, swing, 2, 88 See also Reverse repurchase Project finance, 136, 145, 146, 154 agreement (reverse repo) Public Investment Fund (PIF), 46, 72, Reserve portfolio (RP), 195, 198, 200 122, 156, 221, 263, 273, 291 Reserves ratio, banking, 42 See also Sovereign Wealth Fund Reserves, and voluntary and involuntary accumulation, 194 See also Foreign exchange reserves Q Reverse repurchase agreement (reverse Qatar, 78, 142, 170, 171, 177 repo), 140 Al-Quraishi, Abdulaziz, 53, 54, 57, See also Repurchase (repo) facility 61, 67, 71, 73, 74, 85, 93, Riba, 7, 8, 28, 30, 185 95, 106, 123, 302, 303, 307 Risk-adjusted return, Quasi-fiscal deficit, 217 198, 199 INDEX 327

Risk management SAGIA (Saudi Arabian General counterparty, 206 Investment Authority), 132, 135 liquidity, 197, 206 SAMA (Saudi Arabian Monetary market, 197, 206–207 Agency), see Saudi Arabian operational, 202, 206 Monetary Agency (SAMA) Risk parity, 207, 208 Al-Sanea, Maan, 151–152 Riyad Bank, 42, 43, 48n4, 72, 264 Santiago Principles, 194 Riyadh, Saudi Arabia, 2, 17, 19, 27, See also Sovereign Wealth Fund 28, 30, 44, 45, 48n1, 50, 58, 63, SARIE (Saudi Arabian Riyal Interbank 64, 68, 84, 85, 90, 93, 96, 99, Express), 125 102, 103, 104, 137, 138, 140, Saudi American Bank, 72, 153, 265 143, 148, 153, 160, 171, 177, See also First National City Bank; 186, 273, 288 Wriston, Walter Riyal Saudi Arabia, 1–13, 17–31, 33–48, 49, devaluation crises, 150, 230 50–53, 58, 65, 69, 70, 72, 73, dollar-shadowing, 62 77–79, 82, 83, 85, 88, 96, exchange rate, 62, 226 103–107, 110, 111, 113, 125, international currencies and, 70, 74 127–129, 131, 132, 135, 136, liquidity, 70 140, 142, 143, 145–147, 149, revaulation crisis 2007-2008, 45, 150, 154, 156, 160, 169–171, 143, 144 175, 177, 185, 194, 200, 214, Roaring Nineties, and stock 215, 220, 221, 222, 225, 227, markets, 118 230, 232–243, 245–248, Roosevelt, Franklin Delano, 23, 245, 251–256, 258–260, 267, 246 270–284, 291–299 Roulette wheel, 6, 12, 109, 175, 182, inﬂation in, 13n8, 225, 226 256, 295 population statistics, 9, 112, 129 See also Random walk, Duration Saudi Arabian Basic Industries dependence Corporation (SABIC), 129 RP (reserve portfolio), 195, 198, 200 Saudi Arabian General Investment Authority (SAGIA), 132, 135 Saudi Arabian Monetary Agency S (SAMA) Saad-AHAB affair, 152, 153, 163, Ali, Anwar and, 38, 42, 43, 47, 50, 277, 279, 284 51, 251, 289 See also Ahmed Hamad Al-Gosaibi annual reports, 6, 11, 12, 34, 39, Limited (AHAB) 62, 65, 68, 69, 71, 112, 116, Saad Group, 151 119, 120, 121, 124, 130, 140, SAA (Strategic Asset Allocation), 197 158, 159, 163n1, 257 SABIC (Saudi Arabian Basic Industries Banking Control Law, 43, 264 Corporation), 129 BSDAs, 96, 97, 98, 100, 107 328 INDEX

Saudi Arabian Monetary Agency Saudi Arabian Riyal Interbank Express (SAMA) (cont.) (SARIE), 125 central bank, 2, 5, 7, 8, 9, 29, 33, Saudi British Bank, 72, 123 35, 36, 38, 41, 42, 56, 62, 64, Saudi Cairo Bank, 48n4, 72, 264, 265 70, 72, 73, 74, 87, 92, 96, 97, Saudi Credit Bureau (SCB), 127, 161, 99, 102–104, 106–108, 111, 265, 289 115, 119, 122–125, 127–129, Saudi debt episodes 131, 137, 139, 140–150, 152, in 1988-2007, 214, 215, 216, 220, 153, 156, 159, 161, 162, 169, 221 174, 175, 176, 177, 178, 182, in 2015, 215, 220 185, 194, 195, 197, 199, 205, See also Bankers’ Security Deposit 207, 209, 214–217, 220–223, Account, Floating rate notes, 226, 229, 230, 241, 242, 243, Government Development 252, 253, 259, 260, 263, 264, Bonds 265, 267, 276, 277, 279, 280, Saudi French Bank, 48n3, 72 287, 288, 289, 298 Saudi Hollandi Bank, 42, 57, 72 Charter, 7, 28, 29, 38, 97, 99, 242 See also Netherlands Trading Consumer Protection Company Principles, 275 Saudi Industrial Development Fund credit criteria for investments (SIDF), 46, 70, 153 by, 202, 206 Saudi Interbank offered rate Deposit Insurance Fund, 267 (SAIBOR), 115, 222 early problems, 4 Saudi International Bank (SIB), 90 founding of, 2 Saudi Stock Exchange (Tadawul), 137, GDBs, 124 146, 147 home mortgage regulation, 267 Saudization, 43, 72, 123 IMF loans from, 161 Al-Sayari, Hamad, 85–87, 89, 90, 93, investment culture, 195, 196, 220 95–96, 98, 99, 100, 103, 104, Investment Department or 106, 144, 150, 162, 176, 259, Investment Deputyship of, 45, 287, 302–304, 306, 307 54, 56, 92, 93, 94, 99, 111, Securities lending, 201, 204 115, 196, 210n4, 211n6, Shariah-compliant banking, 7, 10, 42, 213, 287 72–73, 104, 122, 125–128, 140, reorganized in 2013, 275 153, 154, 161, 162, 185, 215, Saudization, 43, 71, 72, 102, 123, 218, 222, 267, 269, 276, 281 265, 275, 294 banking services and investment target of blame, 264 products, 281 See also Investment Department of judges, 160, 161, 162 SAMA; SAMA annual reports; lack of hedging instruments, 283 SAMA central bank law, 125, 126 INDEX 329

product fragmentation, 283 issuers, 215, 217, 222 regulatory challenges, See also Shariah-compliant banking 282, 283 Al-Suleyman, Abdullah, 18, 20–30, See also Islamic banking; Sukuk 31n2, 35, 36, 57, 213, 214 Al-Shumrani, Mohammed, Supreme Economic Council, 130, 210n4 129, 150 Shura Council, also called Majlis As- Swaps, 70, 87, 204 Shura, Consultation SWF (Sovereign Wealth Fund), 3, 55, Council, 142, 144, 161, 288 73, 195, 205, 209, 238 Silver, 21, 22, 25, 26, 252 Swing producer, 2, 88 Simon, William, 50, 52, 53 Sovereign Wealth Fund (SWF), 3, 55, 73, 195, 205, 209, 238 T Special Drawing Rights (SDR), 45, 52, Tactical asset allocation (TAA), 197 61, 62, 243, 257, 260 See also Non-oil revenues renminbi joins basket of currencies Tadawul All-Share Index (TASI), 129 comprising, 242 Tadawul (Saudi Stock Exchange), 137, See also International Monetary 146, 147 Fund Tasattur (informal expatriate business Specialized Credit Institutions owners), 112 (SCIs), 44, 70, 123 Taxes, 4, 18, 19, 132, fi Spending, De cit, 111 185, 186 fi fi See also Budget De cit; Fiscal De cit Thatcher, Margaret, 65, 106 Standard Oil Company of California TIBC (The International Banking (SOCAL), 23 Corporation), 151 See also California Arabia Standard See also Saad-AHAB affair Oil Company TIPS (Treasury Inflation-Protected ’ Standard and Poor s (S&P) Global Securities), 207 Ratings, 132, 136 Treasury bills, US, Standish, Ralph, 36, 38 46–47 Stock markets Treasury bonds, US, 42, 46–47, Roaring Nineties, 118 50, 222–23 Tadawul, 137, 146, 147 Treasury Inflation-Protected Securities Strategic Asset Allocation (SAA), 197 (TIPS), 207 Suez Crisis in 1956-1957, 35, 37, 41 Sukuk corporate, 154, 215, 217, 222 U government, 154, 215, United Arab Emirates (UAE), 74, 217, 222 137, 169, 171 holders, 218, 219 See also Emirates 330 INDEX

United Kingdom (UK), 65, 72, 90, W 106, 123, 173, 180 WB (White Weld and Baring United Saudi Commercial Bank Brothers), see White Weld and (USCB), Baring Brothers (WB 265 Western/conventional banking, see United States (US), 7, 11, 12, 22, 23, Conventional/Western banking 25, 27, 31n1, 41, 44, 49, 50, 52, Western Europe, 256, 291, 292 57, 58, 66, 82, 87, 90, 110, 117, White Weld & Co., 54, 55, 59, 79, 84, 121, 125, 126, 128, 133n5, 144, 195, 210n3 148, 149, 152, 160, 161, 178, White Weld and Baring Brothers 180, 182, 184, 186, 188, 189, (WB), 54–57, 59, 60, 62, 63, 64, 193, 194, 195, 225, 239, 245, 66, 67, 69, 73, 79, 84, 85, 87, 89, 246, 247, 256, 258, 259, 260, 90, 91, 93, 94, 95, 96, 98, 102, 273, 277, 291, 292 195, 210n3 inﬂation in, 57, 66, 118, 132, Wilberding, Steve, 84–86, 89, 93, 95, 149, 208 98, 99, 210n3 Memorandum of Understanding World Trade Organization with, 195 (WTO), 147 Treasury bills, Wriston, Walter, 72, 73 46–47 Treasury bonds, 42, 46–47, 50 USCB (United Saudi Commercial Y Bank), 265 Yamani, Zaki, 65, 88, 89, 91 US Federal Reserve Board (Fed), 52, Yansab, 136, 137 54, 55, 66, 73, 90, 144, 149, Yemen, 41, 171 179, 180, 184 Yen (Japanese currency), 58, 61, 67, 249, 260 Young, Arthur, 18, 24–31, 33, 35, 48n1, 64, 99, 253 V Vision 2020, Banking, 274 Vision 2030, 290–291, Z 294–295 Zakat (type of capital tax), 18, 19