Question

saudi arabia banks

1- With Accounting for credit risky financial instruments not recognized at observed market value generally involves estimating expected future Credit Risks and Losses with reference to its “Disclosers”.

Explain this statement “Disclosers”. in your own words with statistical examples of the data from the Saudi Local Banks or Financial Institutions. (Case Study) (1.5 marks)

3- Mortgage banking is primarily a fee based rather than interest rate spread –based business.

You are required to describe and explain in brief from the structure of mortgage bank’s Balance sheet, Income statements and Cash flow statements respectively from the statistical information of Saudi Local banks (mortgages banks) or financial institutions. (Case Study) (1.5 marks)

Answer 1

1. Disclosures - It is an additional information regarding a company`s financial operations.Every institution has to disclose their business operations.

In Saudi Arabia all the banking and insurance regulators requires all the Saudi Arabian banks and insurance companies whose shares are listed on Saudi stock exchange to publish financial statements in conformity with IFRS.

To examine the level of risk disclosure in Saudi listed banks , annual reports , was required. for the purpose of constructing the risk disclosure indexes, an extensive review of prior studies was undertaken.Many risk indices were created and followed.

The following shows the risk levels disclosures of Saudi Arabia banks.

SAUDI INVESTMENT BANK

FINANCIAL AND OTHER RISKS - 100%

DERIVATIVE AND HEDGING AND GENERAL RISK- 45%

BUSINESS RISK - 60%

AVG RISK- 69%

ARAB NATIONAL BANK

FINANCIAL AND OTHER RISKS- 81%

DERIVATIVE AND HEDGING AND GENERAL RISK- 58%

BUSINESS RISK - 52%

AVG RISK- 73%

These are certain risk level disclosures by Saudi Arabia banks.

3. THE STRUCTURE OF MORTGAGE BANKS BALANCE SHEET, INCOME STATEMENT AND CASH FLOW.

BALANCE SHEET- the balance sheet shows the assets and liabilities of the banks.

the asset side includes -deposits, short term investments, funds and securities etc.

the liabilities side include - mortgage servicing rides, goodwill, customer and other receivables.etc

INCOME STATEMENT - it includes the incomes and expenses of the banks.

INCOMES- loans and leases, debt securities, other interest incomes, mortgage banking incomes etc

EXPENSES - deposits, short term borrowings long term debts etc.

CASH FLOW STATEMENTS-Its includes the inflow and outflow of cash according to their activities in bank.