The commencement in Saudi Arabia earlier this week of both a regulated bond and sukuk (Islamic bond) market is “a very sensible approach” to the problems facing many Saudi banks–namely the fact their loan-to-deposit ratios already exceed the central bank’s imposed ceilings–and will help to create “deeper and wider” financial markets, according to Rajiv Shukla, regional head of debt markets at HSBC Saudi Arabia. “No market should depend on one pool of liquidity,” he added.
The Saudi Capital Market Authority hopes to give potential issuers enough forms of finance to ease pressure on banks and add another layer to the nation’s capital markets. In April, for instance, it announced it was considering the introduction of options, short-selling and futures onto its exchange (Tadawul) in addition to ETFs. It also underscored the need for holders of more than 5% of a company to disclose ownership in order to improve transparency and ensure compliance with corporate governance rules.