Abu Dhabi: The banking sector is the main source of risk for financial stability, said financial experts at the opening of the 8th high level meeting for the Middle East and North Africa region.
The conference, organised by the Arab Monetary Fund, the Financial Stability Institute and Basel Committee on Banking Supervision, reviewed a number of policies and initiatives to build a resilient financial system.
Dr. Abdul Rahman Al Hamidi, vice governor at the Saudi Arabian Monetary Agency, said: “Reinforcement of the micro-prudential institutional soundness through effective bank regulations and supervision is of paramount importance. Therefore, supervisors have to adopt the latest techniques and best practices.”
Al Hamidi added that any indications of financial unsoundness of individual banks or the overall banking system will provide an indication of how likely it is that the problems will be transmitted to the real economy such as through a reduction in credit supply.
“Regional supervisors should adopt a macro-prudential approach in terms of surveillance and regulation by assessing potential risks by looking at the broad economic and financial conditions that would help build up risks to the financial systems and to the economy as a whole,” he added.
Prudential measures
Dr. Jasem Al Mannai, director general and chairman of the board of directors of the Arab Monetary Fund, sought the adoption of prudential measures at the micro and macro levels.
“The core principles for effective banking supervision and the related measures aimed at strengthening bank governance and reinforcing transparency and financial disclosure standards as well as the measures to address risks are posed by systematically important financial institutions and those associated with the implementation of the Basel III framework,” Dr. Al Mannai said.
He stressed that there is a need to develop new principles to reflect key advances in regulatory thinking that includes devoting supervisory attention in line with the risk profile and systemic importance of banks.
“We should adopt a broad financial system vision that focuses on macro-micro prudential levels of supervision and foster robust market discipline through sound supervisory practices in the areas of corporate governance, disclosure and transparency,” Dr. Al Mannai said.
