History of the Saudi Arabian Monetary Agency

SAMA

Historical evolution of functional responsibilities of SAMA

History of SAMA (Saudi Arabian Monetary Agency)

The Saudi Arabian Monetary Agency (SAMA) was established on October 4th, 1952 and is headquartered at Riyadh, Saudi Arabia. SAMA operates as the central bank of the Kingdom of Saudi Arabia (KSA). Before setting up the Saudi Arabian Monetary Agency, KSA utilized the service of Saudi Hollandi Bank as the central agency to keep the governments gold reserves. The idea of setting up SAMA as the central government operated agency was materialized by Abdallah Sulaiman, the then finance minister of KSA. The currency that SAMA regulates and prints is the Saudi Riyal, the official currency of KSA. The establishment of SAMA was decreed by King Abdul Aziz on 25/7/1371H, 20th of March, 1952 (SAMA, 2013).

Historical perspective

SAMA is currently the official agency charged with management of financial system. With the evolution and development of the financial system of Saudi Arabia, the role and responsibilities of SAMA have also transformed. Although, SAMA did not have the same structure and independence since its becoming, the institution has gained much independence from the government's interference in the monetary policies of KSA. The Saudi Arabian Monetary Agency was started with the help of the U.S. And Mr. George A. Blowers was the first governor of the agency. The agency started as having a confined role operating as a central bank under the confines of Islamic law. Technical and operational support from the start of this institution was provided by institutions such as International Monetary Fund (IMF) and other Western central banks. The first two governors of SAMA were George A. Blowers (1952-1954) and Ralph Standish (1954-1958). SAMA currently operates as the central bank but historically the agency has also managed the sovereign wealth of the kingdom (Ramady, 2010).

Significant influence of the U.S. And Saudi political and economic links has been casted on the operations and management of the agency since its early days. The role of Aramco of KSA and the U.S. embassy in Saudi Arabia has been significant in convincing the then King Abdul Aziz to develop an institution that was to be charged with monetary regulation and sustaining monetary stability. The initial setup of SAMA was totally outsourced and the accountants for the agency were hired from other Arab countries such as Lebanon. While sustaining itself in the initial era of its existence by charging government services, the agency has been developed as a quasi-autonomous central bank and regulatory body for monetary management of KSA. The current banking system of KSA is also significantly developed by SAMA. Following table displays the chronological development of SAMA.

Official command

25/7/1371H (20/4/1952)

First decree (No. 30/4/1/1046) for establishing the Saudi Arabian Monetary Agency, its venue in Jeddah

25/7/1371H (20/4/1952)

Decree No. 30/4/1/1047 for approving the Charter of the Saudi Arabian Monetary Agency

23/10/1371H (15/07/1952)

Mr. Rasim Al-Khalidi to be appointed as Vice-Governor

30/4/1/1743 and 30/4/1/1744 to appoint Mr. George A. Blowers as governor SAMA and establishment of Board of governors of SAMA

14/1/1372H (04/10/1952)

Start of Operations at Jeddah

23/5/1377H (15/11/1957)

Royal Decree No. 23 authorized SAMA to issue official paper currency

Authority to discharge all public and private debts and obligations

Source: (SAMA, 2013)

Thus, it was through the evolutionary development of the agency that it assumed the current shape of being a regulator and independent monetary agency. Bank and risk management is the broad role that has been assumed by SAMA on the same footprints as of Western banking system.

3- Historical evolution of functional responsibilities of SAMA

As mentioned earlier, it not until the monetary chaos of 1957 that SAMA was provided with some autonomy to regulate the money market of Saudi Arabia. However, after SAMA was decreed to issue currency notes and discharge all public and private debt and obligations, the agency kept increasing its role and responsibility in regularizing the banking system and risk management of commercial banking system in the Kingdom.