Saudi Arabia's central bank will play a bigger role in the supervision of the country's financial sector as the kingdom weighs opening up its stock market to direct investments by foreigners.
The country's Capital Market Authority (CMA) said on Sunday that it had signed a cooperation agreement with the central bank or Saudi Arabian Monetary Agency (SAMA) to coordinate supervision of the financial sector in order to improve its stability.
As per the agreement, the two entities will coordinate in the supervision of corporate governance, risk management measures, initial public offerings (IPOs), sukuk issuance and merger and acquisition regulations as well as the exchange of information.
Currently companies need only CMA approval for mergers and capital increases.
"It's been to a degree anticipated... From the market perspective it makes sense to have streamlining and making sure any inconsistencies are eliminated ahead of time rather than after the fact," said National Commercial Bank chief economist Jarmo Kotilaine.
"Given the stage of development in the Saudi market, it makes sense to have a system whereby the regulators compare notes on an ongoing basis and coordinate their activities," he said.
CMA also stated that the two bodies would coordinate before issuing or renewing regulations or taking any steps to ensure the stability of the Saudi financial sector.
Saudi Arabia is in the process of finalising plans for foreigners to invest directly in its stock market, the biggest in the region.
Last week the CMA amended article 14 of its listing rules, allowing foreign companies to list securities on the kingdom's bourse, taking the kingdom a step closer to direct ownership for overseas investors.
In December Saudi King Abdullah appointed a new central bank governor, Fahd bin Abdullah al-Mubarak, replacing Muhammad al-Jasser.
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