Al – Journal of Riyadh Banks amortize 12 billion … The capital ratios affected by Zakat and the accounting standard "9"

In recent years, Saudi banks have proven resilient to the pressures of the recession, have high credit ratings, comparable to the highest rates of the world's largest banks, and have easily withstood various shock scenarios. even when oil prices fall below $ 30 per barrel. The Saudi Arabian Monetary Agency (SAMA), which has made financial security one of the most important requirements of its regular monitoring, aims to remedy any imbalance that could disrupt its indicators, while testing the underlying macroeconomic pressure. a big hit for the Saudi banking sector. Noi to get an assessment of the capacity of the Saudi banking sector to absorb macroeconomic shocks.

While all listed companies on the Saudi market were moving to international accounting standards, Saudi banks adopted the accounting standard ("9") instead of the previous IAS 39, which affected shareholders' equity and the solvency of the Bank. January 1, 2018. IAS 39 allocates provisions when the customer has actually defaulted. Accounting standard 9 recognizes provisions on the basis of the prospect of the failure of a future customer, even if it is not impaired. This standard gives banks the ability to withstand any default May occur In financing transactions, the application of this standard has had a significant effect on shareholders' equity during the previous year 2018, with additional provisions having been accrued and transferred in early 2018 retained earnings to the allowance for credit losses.

Nonperforming loans increased in 2018 to about 25 billion riyals, an increase of 22% over 2017. They represent about 1.8% of the total financing portfolio, while they were up by 1.5% in 2017, but that they were considered good because of the economic slowdown observed in recent years. The ratio should improve from 2019 with the return of public spending on the rise, especially capital expenditure, the highest ratio of outstanding loans compared to the financing portfolio, ie the first bank 4.29%, followed by 3.02% by SABB, and is expected to merge this year. Reducing non-performing loans and having negative results Al-Rajhi Bank has the lowest rate (0.98%), probably because it focuses on financing people less affected by the transfer of the monthly salary and that the bank receives payments, unlike companies that may be facing difficult situations.

Provisions for credit losses increased by more than 29% in 2018 with growth in nonperforming loans and the implementation of accounting standard 9. Non-performing loan coverage increased to 171%, with most banks subject to provisions being Al Rajhi Bank, which accounts for 342% of the total nonperforming loans. The bank was able to resist all the variables of the movement of the low value of the financing: the provisions of the National Bank represented 142% less than the average of the sector. It was noted that the bank had benefited from the reduction of the provision in the last two years to maximize profits. For non-performing loans at 112%. Banks have written off about 12 billion riyals during the year 2018. According to SAMA regulations, banks are obliged to write off all bad debts that have been blocked for 360 days. But the amount decreased by 10% over the previous year, a positive indicator of the effectiveness of debt management in the recovery of outstanding debts, the National Bank has written off about 47 billion dollars, up about 47% from the previous year. The best bank for reducing bad debts is the SABB bank. Down 82%.

Capital ratios decreased in 2018 for two reasons: the first is the application of Accounting Standard 9 as of the fiscal year, which resulted in the transfer of additional amounts to the provision for losses receivables and was deducted from equity, in particular undistributed earnings, and Zakat receivables. The status of the reserve in the other reserves in equity and in the settlement with the general authority of Zakat, has transferred by the end of the year the distribution of own funds in other liabilities, which had a greater impact on Al Rajhi Bank, which resulted in a 13% reduction in core capital and support. Banks in Riyad Bank and Albilad increased by 7% and Bank Albilad by 7%, Major banks having managed to increase the equity ratio being Al-Jazeera Bank, which increased by 31% due to the capital raising of 3 billion riyals and an additional capital of 30 million. about 2 billion riyals. Basel III Committee, the capital adequacy ratio should not be less than 8% and the capital base at least 10.50%. SAAM has made Saudi banks the best banks in the world in terms of capital ratios. solvency and adequacy of own funds. The capital ratios of Saudi banks are twice as high as those of Basel III T of the largest banks in the world.