VIII. TRADE AND PROJECT FINANCING Brief Description of Banking System Saudi Arabia has a well developed banking system consisting of 12 commercial banks. The assets of the consolidated banking system totalled $81 billion at the end of 1993, an increase of 10.4 percent from the start of the year. The five largest banks account for 70 percent of the assets of the banking system. Three of the commercial banks are wholly Saudi-owned, including the largest National Commercial Bank and second largest Riyad Bank; the remaining nine are joint venture banks. The major foreign partners in the Saudi joint venture banks are Citibank, Arab Bank Ltd, Banque Indosuez, HSBC Holdings, and ABN Amro. Banks operating in Saudi Arabia as measured by total assets: The National Commercial Bank Riyad Bank Saudi American Bank Arab National Bank Al-Rajhi Banking and Investment Corporation Saudi French Bank Saudi British Bank Saudi Cairo Bank Saudi Hollandi Bank United Saudi Commercial Bank Bank Al-Jazira Saudi Investment Bank Islamic Development Bank Foreign Exchange Controls Affecting Trading Saudi Arabia imposes no foreign exchange restrictions on capital receipts or payments by residents or nonresidents, beyond a prohibition against transactions with Israel. Saudi Arabia in practice pegs its currency, the riyal, to the dollar after it suspended ties to the IMF's Special Drawing Right in 1981. Saudi Arabia last devalued the riyal in June 1986 when it set the official selling rate at SR 3.75 = USD 1. The Saudi Arabian Monetary Agency and all residents may freely and without license buy, hold, sell, import, and export gold, with the exception of gold of 14 karat or less. What is General Financing Availability Most types of financing are available from the Saudi Commercial banks. Customers can obtain secured or unsecured loans, secured or unsecured overdrafts, and letters of credit facilities. Use of credit cards is becoming more widespread in Saudi Arabia. Since late 1993, there has been a general tightening of liquidity in the banking system because of a slowdown in the growth of deposits and a strong demand for capital. This tightening of liquidity is adding to existing pressures for higher interest rates. How to Finance Exports/Methods of Payment Most trade with the Kingdom is financed through standard letters of credit. Types of Available Export Financing and Insurance (Including Bilateral Eximbank and the other export credit agencies have been involved in Saudi Arabia supporting trade with private Saudi companies. The government of Saudi Arabia will soon begin using the facilities of the export credit agencies to support major infrastructure projects. Islamic Development Bank The Islamic Development Bank fosters the economic development and social progress of member countries and muslim communities. It participate in equity capital and grant loans for productive projects and enterprises besides providing financial assistance to member countries in other forms for economic and social development. Project Financing Available, Including Lending from Multilateral Institutions and Types of Projects Supported Project financing is available in the Kingdom from longer-term loans by the local commercial banks and Saudi specialized credit institutions such as the Saudi Industrial Development Fund or the Public Investment Fund. The Saudi government does not receive project financing from multilateral institutions such as the World Bank. List of Banks with Correspondent U.S. Banking Arrangement Because of their ownership structure, Saudi American Bank (Citibank) and Saudi Investment Bank (Chase Manhattan) have direct correspondent relationships with U.S. banks. The Embassy assumes that the other Saudi banks also have correspondent relationships with the U.S. institutions, whether the home office in the United States or branches in Europe or Bahrain.