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What’s in a name: Name of Saudi Arabian Monetary Authority changed to the Saudi Central Bank

Summary:
Interesting development in the middle-east. The Saudi Arabian Monetary Authority changed its name to Saudi Central Bank and the central bank got new objectives and independence: The Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al-Saud, has approved the Saudi Central Bank Law. The new law includes changing the name of the Saudi Arabian Monetary Authority to the Saudi Central Bank, with direct reporting to the King. The Saudi Central Bank will continue to enjoy financial and administrative independence. This approach comes in line with international best practices for central banks. The law also stipulates that the Saudi Central Bank shall replace the Saudi Arabian Monetary Authority in all its rights and obligations. The new law identifies the objectives of the Saudi

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Interesting development in the middle-east.

The Saudi Arabian Monetary Authority changed its name to Saudi Central Bank and the central bank got new objectives and independence:

The Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al-Saud, has approved the Saudi Central Bank Law.

The new law includes changing the name of the Saudi Arabian Monetary Authority to the Saudi Central Bank, with direct reporting to the King. The Saudi Central Bank will continue to enjoy financial and administrative independence. This approach comes in line with international best practices for central banks. The law also stipulates that the Saudi Central Bank shall replace the Saudi Arabian Monetary Authority in all its rights and obligations.

The new law identifies the objectives of the Saudi Central Bank as follows:

    1. Maintaining monetary stability.
    2. Promoting the stability of, and enhancing confidence in, the financial sector.
    3. Supporting economic growth.

 In addition, the law confirms that the Saudi Central Bank is responsible for setting the monetary policy and choosing its instruments and procedures. It explains the relationship of the Saudi Central Bank with the government as well as relevant international entities. Moreover, it updates the governance framework of the Saudi Central Bank’s operations and decisions.

According to the new law, the Saudi Central Bank will continue to use the acronym “SAMA” due to its historic significance and relevance locally and globally. The banknotes and coins of all denominations bearing the name of the Saudi Arabian Monetary Authority will remain in circulation and keep their status as legal tender.

What would the differences be? This article gives some ideas:

While the SAMA acronym will remain, Hassan Alwatban, an economic consultant, outlined the differences between the monetary authority and the central bank.

For the central bank to perform its duties properly, he said it needed to be fully independent when it came to decision-making, especially decisions related to managing state funds.

Another difference was that the president of the central bank would not be under the state’s authority and their nomination would be made by a legislative authority. The government or state could not appoint or remove the president except by the most supreme judiciary authority.

Thirdly, he added, a government agency could not interfere in the bank’s affairs because the bank enjoyed full monetary power.

Alwatban told Arab News: “Therefore, changing the monetary authority to a central bank is healthy for the national economy.

“The tasks of the Ministry of Finance, which is responsible for financial policies, will be set apart from the tasks of the central bank, which is responsible for setting the monetary policies. Before the change, the tasks of the Ministry of Finance and SAMA overlapped.

“Besides, the Ministry of Finance was in charge of the financial policy and the monetary policy at the same time, a fact that made SAMA focus on serving the banks’ interests more than focusing on serving the interests of citizens,” he added.

hmm..

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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