Assess Competitive conditions in the banking industry in Saudi Arabia - Essay Example

udi Arabia, the need to establish and develop a modern banking industry was felt, and as a result the foundations of a full-fledged banking industry was laid in the year 1952 (Homoud, 2011). Keeping in view the significant growth and developments in the banking industry of the country, the question arises that whether the banking industry of Saudi Arabia is competitive enough over the past few years (Royal Embassy of Saudi Arabia, 2014). In this paper, the researcher has made use of the method put forward by Rosse and Panzar (1977) for the measurement of the extent to which competition exists in the banking industry of a country.

In this regard, the researcher has presented estimates of the Rosse-Panzar H Statistic by making use of information pertaining to financial performance of selected Saudi Arabian banks. After the introduction section, the report includes a brief review of the banking sector of Saudi Arabia, a discussion of the theory, methodology and data considered in conducting this study, empirical results obtained from analysis of information and conclusions reached thereon. Today, the Saudi Arabian banking industry is regarded as amongst the fastest growing and developing in the world.

Apart from the fact that the operating environment in the country for banks is competitive at present, the industry is expected to gain more competency owing to the fast paced technological and regulatory developments in the region and all over the world. The competency, resilience and strength of the Saudi Arabian banking industry is also evident from the fact that during the recent financial crisis, the industry managed to report positive growth figures, and also showed consistency in its growth in lending operations.

At present, the Saudi Arabian banking industry is largely run by private sector and therefore capital lent in the country largely moves from the private sector (Homoud, 2011; Almazari & Almuman, 2012). As per the statistics published by the Central