Saad, Algosaibi debts 'pose no systemic risk' to banking

Saudi Arabia's central bank sees no risk to the country's banking system from two troubled conglomerates but the government has set up a panel to examine them and take appropriate action, the bank's governor said on Tuesday.

Banks in the region have been coping with the fallout from debt restructuring at Saad Group and Ahmad Hamad Algosaibi & Bros (AHAB).

"There is no systemic risk on the Saudi banking system from the debts of these two firms. Profitability, however, could be affected," Muhammad al-Jasser, governor of the Saudi Arabian Monetary Agency (SAMA) said at a news conference.

Saad and Algosaibi are embroiled in a legal battle in the United States after defaulting on debts, with some bankers warning the total cost of writedowns may hit $22 billion and affect around 120 banks.

The comments are Jasser's first on the issue since the two groups' problems came to light in late May when it froze the accounts of Saad's chairman Maan Al-Sanea, a decision which he has never confirmed or commented upon.

"The government has taken a decision since these two firms may affect the business sector in the kingdom, and its reputation and position," Jasser said.

"The government has set up a special committee to look into the two firms, follow the situation of these two firms and take appropriate action."

The committee is submitting its reports to "the higher authorities in the government", he added.

He did not disclose additional information. "These two firms are family-owned, they are not banks licensed by the central bank or the Capital Market Authority. So it is not up to us to deal with the issue of these two firms".

Algosaibi is suing Maan Al-Sanea for fraud in a case involving allegations of $10 billion in loan irregularities.

"Within the kingdom, we have not noticed any financial irregularities within the kingdom. We are not responsible for what happens outside the kingdom," Jasser said. (Reuters)

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