fahad almubarak : brief review of financial developments in saudi arabia speech by his excellency dr fahad almubarak, governor of the saudi arabian monetary agency ( sama ), marking the seventh anniversary of blessed allegiance pledge to the custodian of the two holy mosques king abdullah bin abdulaziz, riyadh, 17 may 2012. * * * saudis celebrate on the 26th of jumada ii 1433h ( may 17, 2012 ) the seventh anniversary of the blessed allegiance pledge to the custodian of the two holy mosques king abdullah bin abdulaziz. the celebration is a true image of loyalty to the custodian of the two holy mosques, who is faithful to his nation ’ s interests. it is based on well - established bases, in the forefront of which are the tributes of our wise leadership such as the great keenness on the welfare of citizens and the enhancement of the development process. it is difficult to enumerate the achievements of the custodian of the two holy mosques in a few words, but, however, i will touch upon some of them. the custodian of the two holy mosques has taken a broad range of decisions and measures aiming at restructuring and regulating the economy, updating regulations and legislation to enhance the efficiency and competitiveness of the economy and support the optimal operation of production factors, apart from providing an advanced regulatory and administrative framework and an attractive environment for domestic and foreign investments to achieve diversity in the economic and productive environment in order to continue creating job opportunities for the sons and daughters of the kingdom. fortunately, oil prices have constantly improved, helping to accomplish many of the development objectives. as a result, the private sector during the period from 2005 up to the end of 2011 achieved a real annual growth rate averaging 5. 5 percent. the balance of payments ( bop ) recorded a surplus of rls 2. 5 trillion. the actual expenditure of the public finance stood at rls 3. 8 trillion, of which rls 1. 0 trillion were for capital expenditures. moreover, the ratio of public debt to gdp declined from 39. 2 percent in 2005 to 6. 3 percent in 2011. the banking sector recorded strong and constant growth during that period, surpassing significantly the repercussions of the global financial crisis, and total assets of banks rose by more than two fold. many development projects have been approved for enhancing and modernizing the infrastructure, including roads, airports, telecommunications, water & electricity

outcome of decades of evolution. and this reflects, and is consistent with, the long - term developments of central banks ’ mandates globally. it can be argued from a historical perspective that changes in these mandates follow common evolutionary paths which are often shaped by crises, such as the global one in 2007 / 2008. the financial stability focus that led to reassessing the importance of financial stability as a policy objective of central banks. before the 2007 / 2008 global crisis, central banks focused on price stability as their primary objective. the crisis triggered a change in the broad environment in which central banks operate 1 / 3 bis central bankers'speeches and thereby also necessitated a continued evolution of the role and governance of our institutions. concerns were raised regarding the ability of central banks to prevent and manage financial crises. this provoked a discussion of central banks ’ role in safeguarding financial stability. ultimately, there was recognition of the need to reconsider or adjust the central banks ’ responsibilities related to financial stability. a major policy response since the global crisis was the enhancement of macroprudential policy framework and the assignment of additional responsibilities to central banks in the fields of financial stability. then central banks developed tools for the practical implementation of the macroprudential framework. understanding the financial cycle the new policy framework and tools, however, can only be as good as the capability to “ diagnose ” when their application is needed. they have limited value, if any, for the purpose of safeguarding financial stability unless the macroprudential authority can detect the accumulation of cyclical systemic risk in the financial system. in other words, achieving the financial stability objective through macroprudential measures cannot be sustainable without understanding the financial cycle. that is why we have considered this to be a topical issue to devote our anniversary conference to. there is no single generally accepted theoretical basis, nor a dominant method, for measuring the financial cycle. thus the role of research becomes significant for policymaking. that is why today ’ s conference is conceived to bring together academic research and central bank practice. the conference structure reflects an understanding that the global financial cycle affects the euro area and its monetary policy, which in turn affects the financial cycle in europe beyond the euro area. therefore, the first session of the conference is on the current phase of the global financial cycle which is to a large extent driven by the us monetary policy. we recall from the 2007 / 2008 crisis how the financial disruptions originated and triggered a full - scale global crisis. the second