The circular is aimed at ensuring that directors and senior managers have sound reputation and are persons of integrity and honesty. Furthermore, over the past two decades, SAMA has issued additional governance related regulations and guidance to banks operating in Saudi Arabia. These include circulars on Internal Controls; Know Your Customers rules, Anti-Money Laundering and Combating Terrorism Financing and Prevention of Fraud. Also, there are specific regulations on the Role of the External Auditors and on the Internal Audit function. SAMA also requires the Board of Directors to establish a specialized Compliance Function that monitors the compliance of the organization with regulations and standards, and has a reporting line to the Board or one of its committees. Moreover, SAMA requires all banks to apply the International Financial Reporting Standards, and that two firms of external auditors are to conduct an annual audit. Furthermore, SAMA has required banks in Saudi Arabia to meet the corporate governance guidance emanating from the Basle Committee on Banking Supervision and more recently from the Islamic Financial Services Board. In this regard, I should mention that SAMA is participating in the IFSB Technical Committee and in various working groups that are developing standards of corporate governance for Shari'ah compliant financial institutions. The leadership role played by SAMA, over the past decades, in promulgating corporate governance standards and in promoting a governance culture has been reflected in the emergence of strong financial institutions and a credible banking system.

*  *  *  BIS Review 47/1998  -8-  GDP growth 1980-1997 Index: 1980=100, seasonally adjusted  135  135 Trend: 1993-97  130  130  125  125 Trend: 1985-90  120  120  115  115  110  110  105  105  100  100  95  95 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 Sources: Ecowin and the Riksbank  Budgetbalance: Sweden and EU-average Per cent of GDP, 1998-1999 forecast by NI and OECD  8 6 4 2 0 -2 -4 -6 -8 -10 -12 -14  8 6 4 2 0 -2 -4 -6 -8 -10 -12 -14  Sweden EU-average  90  91  92  93  94  95  96  97  98  99  Sources: OECD and National institute of Economic Research (NI)  BIS Review 47/1998  -9-  Wage curve: Sweden and EU area Wage/employee, annual percentage change, 1998-1999 forecast by OECD  14  14  12  12  Sweden  10  10  8  8  6  6 EU- area  4  4  2  2  0  0 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99  Source: OECD  Inflationexpectations of labour market organisations Per cent 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5  Jan-95 Feb-96 Nov-97 Feb-98  94  95  96  97  98  99  May-98  00  01  4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5  02 03  Sources: Statistics Sweden and Prospera Research AB  BIS Review 47/1998  - 10 -  Market and administered price components of the CPI Annual percentage change  5.0  5.0  4.0  4.0  Administered prices  3.0  3.0 CPI  2.0  2.0  1.0  1.0 Market prices  0.0  0.0 95  96  97  98  -1.0  -1.0 Sources: Statistics Sweden and the Riksbank  Krona exchange rate with US dollar and German mark 8.5 8.3 8.1 7.9 7.7 7.5 7.3 7.1 6.9 6.7 6.5 jan-95  5.6 SEK/USD (left scale)  5.4 5.2  SEK/DEM (right scale)  5.0 4.8 4.6 4.4 4.2 4.0  jul-95  jan-96  jul-96  jan-97  jul-97  jan-98 Source: The Riksbank  BIS Review 47/1998  - 11 -  CPI and underlying rates of inflation Percentage 12-month change  12  12 CPI  10  10 8  8 UNDINH  6  6 UND1  4  4  2  2  0  0 90  91  92  93  94  95  96  97  98  Sources: Statistics Sweden and The Riksbanken  Average of CPI forecasts of external observers Annual change, per cent  2.5  2.5 Forecast for 1999  2.0  2.0  Forecast for 1998  1.5  1.5  1.0  1.0  0.5  0.5  Outcome for 1997  0.0 Aug-97  0.0 Oct-97  Dec-97  Feb-98  Apr-98  Jun-98  Note.