Saudi Arabia: The foreign assets of Saudi Arabia’s commercial banks surged by 22 percent in February, reaching a total of SR347.63 billion ($92.7 billion), compared to the same month of the previous year.

This notable increase, as reported by recent data from the Kingdom’s central bank, also known as SAMA, reflects a significant expansion in the institution’s international holdings and investments.

Conversely, Saudi banks witnessed a 38 percent surge in foreign liabilities over the same period, increasing to SR288.22 billion. This rise, which encompasses various financial obligations to banks outside the Kingdom, resulted in the calculation of net foreign assets amounting to SR59.41 billion.

Despite the growth achieved by international holdings, the increase in liabilities has resulted in a 21 percent decrease in the net figure from SR75 billion, which was recorded during the same month in the preceding year.

Additionally, SAMA reported that its net foreign assets reached SR1.55 trillion in February. This figure indicates the overall financial strength and global position of the Kingdom’s banking sector. However, it reflects a 5 percent decline compared to the same month last year.

The main difference between the foreign assets of central and commercial banks lies in their purpose and role within the financial system.

Central banks’ foreign holdings are primarily for reserve management and monetary policy purposes, while commercial banks’ foreign assets are for business operations, customer services, and investment activities.

Total reserve holdings totaled SR1.62 trillion, a 5 percent decline from the same month last year.

Reserve assets for financial institutions comprise a range of highly liquid assets held to ensure stability and fulfill short-term financial obligations. Among these holdings are monetary gold, which serves as a traditional store of value and a hedge against currency fluctuations.

Special Drawing Rights represent an international reserve asset created by the International Monetary Fund and allocated to member countries, acting as a supplement to their existing funds.

The reserve position in the IMF refers to a country’s holdings of foreign currencies with the IMF, providing an asset that can be utilized to obtain foreign currency when needed. Additionally, banks hold foreign currency and deposits in international institutes, enabling them to meet obligations denominated in other currencies.

Furthermore, banks invest in foreign securities, such as government and corporate bonds issued by global entities. These investments not only provide a source of income but also offer diversification benefits to the institutes’ portfolios.

In February, investments in international securities accounted for 60 percent of the reserve position.

Saudi Arabia has been bolstering its investment approach by channeling capital into national funds such as the Public Investment Fund and National Development Fund. Consequently, a decrease in reserves could indicate that SAMA’s holdings are being spread across various financial opportunities.