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Saudi banks’ foreign assets surge by 22%, reflecting robust international investments


In February, Saudi Arabia's commercial banks experienced a notable 22 percent surge in foreign assets, reaching a total of SR347.63 billion ($92.7 billion) compared to the same period last year. This increase, as per recent data from the Saudi Arabian Monetary Authority (SAMA), reflects a substantial expansion in the banks' international holdings and investments.

Conversely, foreign liabilities for Saudi banks saw a 38 percent increase during the same period, rising to SR288.22 billion. These liabilities encompass various financial obligations to banks outside the Kingdom, resulting in net foreign assets amounting to SR59.41 billion.

Despite the growth in international holdings, the surge in liabilities led to a 21 percent decrease in the net figure from SR75 billion recorded in the same month of the previous year.

Additionally, SAMA reported that its net foreign assets stood at SR1.55 trillion in February, indicating the overall financial strength and global position of the Kingdom's banking sector. However, this figure represents a 5 percent decline compared to the same month last year.

The primary difference between the foreign assets of central and commercial banks lies in their intended purposes and roles within the financial system.

Central banks' foreign holdings primarily serve reserve management and monetary policy objectives, while commercial banks' foreign assets are utilized for business operations, customer services, and investment activities.

Total reserve holdings amounted to SR1.62 trillion, reflecting a 5 percent decline from the same month last year.

Reserve assets for financial institutions include a range of highly liquid assets held to ensure stability and meet short-term financial obligations. These assets may comprise monetary gold, acting as a traditional store of value and a hedge against currency fluctuations.

Special Drawing Rights (SDRs) represent an international reserve asset established by the International Monetary Fund (IMF) and allocated to member countries, supplementing their existing funds.

The reserve position in the IMF refers to a country's holdings of foreign currencies with the IMF, providing an asset that can be utilized to acquire foreign currency as needed. Additionally, banks hold foreign currency and deposits in international institutions, enabling them to fulfill obligations denominated in other currencies.

Furthermore, banks invest in foreign securities such as government and corporate bonds issued by global entities. These investments not only generate income but also offer diversification benefits to the institutions' portfolios.

In February, investments in international securities accounted for 60 percent of the reserve position.

Saudi Arabia has been enhancing its investment strategy by directing capital into national funds like the Public Investment Fund and National Development Fund. Consequently, a decrease in reserves may indicate that SAMA's holdings are being diversified across various financial opportunities.

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