As per the outlook, the reforms arrive at a time when Hong Kong’s asset management industry is witnessing renewed momentum.

According to the SFC’s latest Asset and Wealth Management Activities Survey, total AUM (Asets Under Management) rose 20% to a record high in 2025, and net fund inflows nearly tripled during the year (up 193%).

Critically, 56% of assets managed in Hong Kong are now invested beyond the Chinese Mainland and Hong Kong SAR, demonstrating the special administrative region’s enduring role as a genuinely global allocation center.

“The reformed Unified Fund Exemption (UFE) regime—described in the report as the most consequential tax development in a generation—directly resolves the legal certainty gap that had previously driven parts of the alternatives business to other hubs. Under the new framework, qualifying carried interest and performance fees will attract a 0% effective tax rate at both the corporate entity level and in the hands of Hong Kong-based employees. Uniquely, this incentive will apply retrospectively from the 2025 assessment year—a competitive advantage that no rival jurisdiction currently offers,” KPMG stated.

Talking more about the impact of the long-awaited reforms on Hong Kong’s asset management industry, Darren Bowdern, Head of Alternative Investments, Hong Kong SAR, KPMG China, said, “The government’s intent with this landmark tax package is unambiguous: it wants this incentive utilised to its fullest extent. By offering a retrospective 0% effective tax rate on both carry and performance fees, Hong Kong has eliminated the operational ambiguities that historically hindered private equity, credit, and hedge fund structures locally. We anticipate strong immediate interest from global asset managers looking to build permanent investment teams and oversee high-value Asian portfolios from Hong Kong.”

As per Bowden, Hong Kong’s capital markets are also gaining significant momentum. The city regained its position as the world’s leading market for IPO fundraising in 2025 and has maintained this strong performance into 2026, currently ranking among the top two globally, with KPMG forecasting full-year IPO fundraising of around HKD 350 billion.

Vivian Chui, Head of Securities and Asset Management, Hong Kong SAR, KPMG China, remarked, “Markets are showing renewed momentum, capital is returning, and policymakers are taking deliberate steps to strengthen Hong Kong’s position in an increasingly competitive global landscape. From the deepest IPO pipeline in a decade to leadership in tokenization and an expanding ETF product shelf, the foundations for sustained growth are firmly in place. The challenge for the industry now is to invest in the people and skills needed to capture these opportunities.”

The KPMG report has identified exchange-traded funds (ETFs) as a significant growth opportunity for Hong Kong’s asset management industry. The average daily turnover of ETFs for the first six months of 2026 was HKD 39.6 billion, an increase of 17% when compared with the same period in 2025.

KPMG expects the market to expand further as investor demand moves beyond traditional passive index products towards active strategies, income generation, thematic exposure, virtual assets, and tactical trading products.

This changing product mix could strengthen market liquidity, broaden investor choice, and create new distribution opportunities for global and regional asset managers.

Arion Yiu, Audit Partner, Financial Services, Asset Management, Hong Kong SAR, KPMG China, noted, “This next phase of growth must, however, be built on investor trust. As products become more sophisticated, particularly in areas such as leveraged, inverse, and single-stock ETFs, managers and distributors will need to ensure that governance, disclosure, and investor education keep pace. Firms that can combine innovation with strong product oversight will be best placed to capture this opportunity.”

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Global energy-related carbon emissions from the production and use of energy rose 1.1% to 35,806 million tonnes of CO₂ in 2025. About 13.3% of that increase came from the United States,” the report said.

Including emissions from the energy sector and from gas flaring and methane, global emissions rose by 1.1% to ⁠41 billion tonnes of CO₂ equivalent. Uncle Sam accounted for 36% of that increase, with total emissions growth of 3.2% on a year-on-year basis, whereas for China, the spike remained at 0.3%.

The United States’ coal consumption, in 2025, jumped 10%, reversing a shift towards cleaner fuels and helping to lift overall emissions.

“China remained the largest emitter, accounting for 31.3% of global energy-sector emissions, but its increase from 2024 was modest at 0.7%. Europe’s emissions rose by 0.5%. North America recorded the largest absolute increase, with emissions rising by nearly 3% from 2024 to 152.3 million tonnes, bucking a 10-year trend of falling emissions,” the Energy Institute study said.

On a per ‌capita ⁠basis, emissions from the American mainland were nearly double those of China at 15.36 tonnes of CO₂ per person, based on Reuters calculations taking the latest population data for 2025 from the US Census Bureau and National Bureau of Statistics of China.

Global energy demand, on the other hand, has continued to rise. As per the study, total energy supply increased 1.7% ⁠in 2025, with renewables making the biggest contribution. Renewable power generation climbed 9.1%, led by a 30% surge in solar.

“Electricity demand rose faster than supply, increasing 3% year-on-year, driven by electric vehicles, data centres and ⁠artificial intelligence (AI). Global oil consumption rose 1.3% in 2025 to 103 million barrels per day, compared with a 1.1% increase in 2024, while production grew 3.5%,” the Energy Institute noted.

In China, gasoline and diesel use declined ⁠in 2025, extending a trend seen in 2024.

“Gas demand growth was concentrated in Europe, the Middle East and North America, with Europe and India relying on imports for nearly half of their supply,” the report concluded.

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During an interaction with International Finance, Omar Mahmood, Head of Financial Services for KPMG in the Middle East and South Asia, and Caspian Region and Partner at KPMG in Qatar, shared his view about the significant trends in the GCC banking sector.

Omar Mahmood said, “2023 emerged as a year of growth post a period of adaptation and investment in the region, reflecting not only the strength of GCC economies but also the results of effective management, digital transformation and improved return on investments over the past few years.”

According to the report this year, Qatar National Bank has maintained its position as the largest bank in the GCC, with assets worth USD 338 billion. Qatar is also leading in terms of having the lowest cost-to-income ratio at 24.6% and the highest coverage ratio for stage 3 loans at 84.2%.

The region has seen a significant double-digit increase of 23.1% in profitability this year, which is mainly due to the growth in loan books, improved interest margins, reduced loan impairments, and ongoing cost-saving measures. Banks have expanded their asset base by 8.1%, driven by lending to high-quality customers, which has resulted in a robust growth in assets.

Net interest margins saw a 0.2% increase due to the rise in interest rates, contributing to profit growth. The non-performing loan (NPL) ratio for banks in the GCC dropped by 0.2% to 3.5%, indicating a conservative approach to managing credit risk.

The return on assets (ROA) in 2022 rose by 0.7% compared to the previous year, reflecting higher profitability in relation to asset growth. Cost-to-income ratios decreased from 40.4% to 39.7%, showing the banks’ commitment to reducing costs and improving operating efficiency. The average coverage ratio for stage 3 loans increased by 0.4% from the previous year, which highlights the banks’ careful approach to provisioning.

Despite facing challenges, banks in the GCC have demonstrated resilience and adaptability in navigating global economic conditions, laying a solid foundation for future growth.

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During the first half of the year, the number of unicorns in the UK has also doubled. Out of the 112 tech unicorns in the country, 40 of them are from the financial technology sector.

Katja Palovaara, fintech programme lead at Tech Nation told the media, “As the UK’s flourishing fintech sector continues to drive more investment than ever before, our fintech companies are not just disrupting traditional financial sectors; they are working alongside them to ensure that everyone has the tools and knowledge they need to succeed financially.”

“Many of these fintechs are not only focused on helping people earn more and invest better, but on making the world a better and fairer place. We can’t wait to see what they do next.”

According to a KPMG report published earlier this year, the UK fintech sector has seen £18 billion worth of deals in the first half of this year, placing the UK in second after the UK. KPMG said that the UK was given a one-off lift by the $14.8 billion purchase by the London Stock Exchange of the financial data provider and Bloomberg rival Refinitiv.

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Even prior to the pandemic, the country was a major contributor to healthcare. According to KPMG, the UAE government contributed 66 percent of its total healthcare spending which stood at $15 billion in 2018. In the following year, the government outlays comprised approximately 70 percent of total GCC healthcare expenditure and the UAE government-funded approximately 69 percent of its total healthcare expenditure of $16 billion. According to GCC growth forecasts, contributions from the private sector are expected to grow at a compound annual growth rate (CAGR) of 7.4 percent compared to a CAGR of 4.9 percent for the government sector during the period between 2018 and 2022.

With the pandemic, the dynamics within the sector are dramatically changing. There is a drive to promote private spending in the healthcare sector by encouraging the adoption of public-private partnership (PPP) models. Since the public-private collaboration has worked well for the UAE, it could further drive the growth of the healthcare sector and prove to be a model for other economies, not only in the Middle East but across the world.

Why public-sector cooperation is key?
To ensure that the healthcare sector was sustainable and ready to tackle the problem of Covid-19, an important decision that the administration took was to promote partnerships between private and government healthcare institutions. One of the biggest challenges that the healthcare providers in the UAE needed to address was to test, identify, isolate and treat Covid-19 patients according to their conditions. In the initial days of the pandemic, this required huge manpower, funding and resources. The government in the UAE was quick to recognise this. The UAE has anticipated the need for testing in gigantic numbers and quarantining facilities. This is where public-private cooperation has helped the UAE healthcare sustain itself. Many private hospitals and healthcare firms in the UAE have stepped in. In May, the UAE achieved a milestone for carrying out the highest number of Covid-19 testing per capita in the world.

Working in close collaboration with the government, the private healthcare sector has brought in its expertise and manpower to fight the virus. What resulted was that the public sector joined forces with the private sector, setting up field hospitals for thousands of Covid-19 patients across the UAE, while private organisations have helped in managing those by providing human resources. With the public-private cooperation in the healthcare sector helping the UAE to fight the future, there is anticipation that the collaboration will see new advancements in the region. Many experts predict that such collaboration holds the key to the development and growth of the overall healthcare sector in the UAE.

Richard Stolz, Associate Director, Advisory, KPMG Lower Gulf told International Finance, that there is a drive to promote private spending in the sector by encouraging the adoption of public-private partnership (PPP) models. “One key driver for the promotion of private investments is the increased need to bring in niche healthcare sector skills, for example, cardiology, that are not yet widespread in the UAE,” he said. “From 2018 to 2022, private-sector healthcare spending is forecast to increase at a cumulative annual growth rate (CAGR) of 9.5 percent, compared with the government contribution growth rate of 4.4 percent.

“Growth is mainly supported by the rising emergence and support for PPP, as well as the increasing demand for treatment and hospital beds amongst an ageing population. Further, the privatisation of hospitals and mandatory medical insurance, especially in Dubai and Abu Dhabi, will likely encourage spending and contribute to a more integrated health system.”

To curb the spread of the virus, lockdown measures were introduced in the UAE and had forced citizens to follow social protocols. On the bright side, there was significant growth for digital health. Many healthtech companies rose during the period to fulfil the demand. For example, Meddy is a GCC-based healthcare firm that allows patients to find doctors, hospitals and book appointments with them through its web-based platform. In light of public-private cooperation in healthcare, Meddy’s Chief Executive Officer Haris Aghadi, told International Finance, that he firmly believes that public-private cooperation in healthcare holds the key for the sector’s development.

“I believe that the pandemic put us in such a situation that we had to come together as a nation to combat it. The healthcare sector in the UAE has witnessed significant growth over the past few years and for it to grow more, the government’s association is key—whether it is in keeping regulations favourable for the private sector, aiding in the healthcare setup, or diminishing problems as we are currently doing in the case of Covid-19,” Aghadi said. Another important aspect of the healthcare sector in the UAE is that most of the population comprises expats. Around 82 percent of physicians and 96 percent of nurses in the UAE are expatriates. Also, citizens above the age demographic of 50 years merely make up 5 percent of the population. This highlights the importance of grooming homegrown talents for the healthcare sector and it can be effectively achieved through public-private cooperation.

Tech innovation improves patient outcomes
KPMG, in its ‘Who cares, wins, the first edition of our UAE healthcare perspectives report’ said that digital innovation is a growing priority. In the present day, a rising number of technologies are disrupting the healthcare information technology (HIT) space and at a very rapid pace. On a global level, administrations are understanding the important aspects of HIT. Additional funds in the form of administration and private investors are being poured into developing technologies that deliver faster, cheaper and more accessible care—while keeping patients well informed. In the UAE, the government is leveraging healthtech and smart healthcare to promote an integrated experience and improve patient outcomes. In particular, the local government seeks to tackle lifestyle diseases putting the country’s healthcare system under pressure.

According to KPMG, the UAE accounts for approximately 26 percent of the total healthcare spend in the GCC. It is ranked among the top 20 countries in the world in healthcare spending per capita, at $1,200. In short, the UAE’s health regulators are increasingly considering the adoption of new smart technologies. A study published by PwC last year shows that 67 percent of consumers in the Middle East are willing to receive healthcare services through virtual means. Some of the UAE’s health regulators are increasingly considering the adoption of new, smart technologies to modernise the healthcare ecosystem. The country is predicted to add an additional $182 billion to its economy by 2035 on the back of accelerated artificial intelligent adoption, further contributing to its vision of becoming a leading, global technology hub for healthcare.

Stolz said, “New models of care are likely to emerge, for example, greater digitalisation with a focus on remote monitoring and consultation. Telehealth, the use of communication technologies to access healthcare remotely, is likely to be integrated into PPP models and government healthcare systems. We will see increased spending on healthcare R&D and innovation.” According to KPMG, the UAE government plans to prioritise fostering the development of future technologies. Regulatory authorities’ openness toward futuristic technologies and their application in the healthcare industry creates an agile environment.

Telehealth is a big game-changer
Telehealth is a game-changer and it is here to stay. Telehealth eliminates the need to physically visit a doctor’s clinic or the hospital and the pandemic has given this a significant push. To curb the spread of the virus, social distancing measures were introduced by the government and this has resulted in telehealth becoming an important communication and treatment tool during the Covid-19 pandemic.

Telehealth facilitates either a synchronous or asynchronous session between the patient and his doctor. Companies providing such services grew significantly in the last year globally. While many new startups providing telehealth services have sprouted since the beginning of last year, big players have also set up their telehealth platforms to tap into the growing segment.

Richard Stolz believes that digitalisation and telehealth have the potential to revolutionise the healthcare sector. Given the implementation of online collaboration tools and platforms driven by the outbreak of the Covid-19 pandemic, remote monitoring and consultation solutions will likely become predominant in the future healthcare landscape. Stolz said, “The UAE has witnessed multiple private-sector hospital players embark on the telehealth journey throughout 2020 – within a short time of the outbreak of the pandemic, several had set up digital telehealth offerings that were quickly absorbed by the market.”

“Patients can consult specialists from the comfort of their homes and offices, get e-prescriptions and sick leaves on their phones, and their medicines re-filled and delivered by the pharmacy to their doorstep,” Aghadi explained. “Telehealth has made treatment convenient for both the patient and the doctor, in terms of cost, effort and comfort.”

The UAE’s pronounced efforts in medical tourism
KPMG estimates the global health tourism industry to have generated revenues of approximately $32.5 billion in 2019 at a CAGR rate of 17.9 percent for the period 2013 to 2019. According to the World Tourism Organization (UNWTO), the medical tourism industry is expected to become a $207.9 billion industry by 2027, expanding at a CAGR of 21.1 percent. The growth is attributed to the growing middle-class populations, especially in regions such as Southeast Asia. Their ability to board a flight seeking medical treatment is enhancing medical tourism. Inbound medical tourism in the UAE has grown steadily. Visitors often arrive in the UAE seeking treatments such as surgery, rehabilitation and cosmetic corrections. Dermatology, orthopaedics and ophthalmology are in their prime at this point. According to the latest Medical Tourism Index Ranking, Dubai and Abu Dhabi ranked sixth and eighth for the best global destinations for medical tourism.

What makes the region attractive for medical tourism is its wider tourism ecosystem. The UAE has a strong tourism sector supported by its tourism attractions, hospitality, entertainment and the provision of world-class aviation and transport logistics. These factors, along with low cost contribute to the UAE’s growing medical tourism industry. KPMG said in its report that the average cost of a hip replacement in developed countries such as the USA and Switzerland is $26,500 and $19,722 respectively; however, when it comes to the UAE, the same procedure costs under $15,000. On the downside, the UAE exhibits higher costs of medical treatments and services compared to countries such as India, Thailand and Singapore, which could push local patients to seek treatments abroad, KPMG said in its report.

Aghadi explained that Dubai is the top Arab destination for medical tourism. It is slowly becoming the hub for offering world-famous treatments with its high-end facilities and medical staff. This in return is boosting the healthcare industry in the region more than ever. “Licenced healthcare professionals are becoming skilled; the entire experience is no less than a vacation with a bonus for travellers as well. And it is important not to forget the economic boost, increase in local employment, and improved tourism activity, with the government’s focus on aiding and improving the healthcare sector in the country,” Aghadi added.

Work models likely to change for greater digitisation
Certainly, healthcare in the UAE remains one of the fastest-growing sectors. This is attributed to the growing number of hospitals and clinics in the country. Aghadi said that in some ways, the pandemic has acted as a catalyst for the healthcare sector in the country. Stating Meddy’s example, he said that within a time frame of two weeks, their team created a HIPAA compliant, which is a telehealth platform that allows patients to access doctors on video calls from anywhere, at any time. “The entire process of consulting the doctor from the payment to the follow-up was shifted online. Similarly, pharmaceutical companies have been in a rush to develop, clinically test, and supply vaccines,” Aghadi further explained. “However, alongside the quick innovation and collaborative problem solving, the virus has left the healthcare industry drained—overworked staff, lesser space, higher costs, and unemployment are just a few of the issues which have arisen during the outbreak. This pandemic has allowed the healthcare sector to always be ready for the future.”

The level of merger and acquisition (M&A) activities not only in the UAE but across six countries of the GCC has increased significantly since last year. Due to the pandemic, many smaller private healthcare providers were hard hit by the lockdown and many of them were mandated to allocate resources to fight against Covid-19. This has to some degrees impacted their liquidity significantly and some were even on the brink of closing their business.

On the other hand, larger private healthcare groups acquiring smaller healthcare players seeking financing aid and support seemed to be a viable option to sustain themselves amid the pandemic. “Increased consolidation through merger and acquisition activity in the global and regional healthcare sectors, as smaller private healthcare groups increasingly face liquidity difficulties caused by the Covid-19 pandemic,” Stolz said, additionally pointing out the phased return of elective surgeries were postponed during the pandemic. Teleradiology and online pharmacy retail are witnessing unprecedented demand. An increasing number of citizens in the UAE are adopting these kinds of new services which were still relatively new to the sector.

The pandemic has also led to greater government focus on healthcare spending, in terms of emphasizing an efficient, robust and dependable healthcare sector for the welfare of its people. As a result, Stolz hopes that policies and decision-making will likely be conducted in a more efficient and coordinated manner. Additionally, the pandemic is anticipated to drive global intergovernmental collaboration. For example, the World Healthcare Organisation and other international and national healthcare authorities will jointly monitor the potential emergence of viruses, Stolz added.

“New models of care are likely to emerge, for example, greater digitalisation with a focus on remote monitoring and consultation. Telehealth, the use of communication technologies to access healthcare remotely, is likely to be integrated into PPP models and government healthcare systems. We will see increased spending on healthcare R&D and innovation,” he added.

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Other global corporations like KPMG, Unilever and the Department of Work and Pensions are already supporting the campaign on a huge level. With that, Microsoft is urging other companies to join the initiative which can also help to firm up the economy.

Clare Barclay, CEO of Microsoft UK, told the media at a Microsoft’s Envision UK, “The shape of the UK economy and its workforce is changing; a change only accelerated by the rapid move to digital working in the wake of the disruption we’ve seen this year. With hundreds of thousands of people losing their jobs and some traditional sectors heavily impacted, we urgently need to invest in UK technical skills and capability to help realise our competitive potential. We want to help people get the right skills to thrive in technology careers, and employers find the right talent to help drive business success and UK prosperity. Together we can build a future based on long-term sustainable growth.”

The country is facing several challenges as a result of the pandemic. It is now establishing global trading relationships and is accelerating its digitisation to enhance competitiveness. This competitiveness will be underpinned by increasing technology careers and developing new talent within the industry.

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In 1952, the Saudi Arabian Monetary Authority was established by two royal decrees and continues to monitor the banking industry to date. Following the establishment of the regulator, it licenced a significant number of local and foreign institutions which introduced new products and services to both retail and commercial customers in the Kingdom. That has led to the creation of today’s key players including the National Commercial Bank and Riyad Bank.

Cut to recent times, the Kingdom’s banking industry demonstrated strong financial performance compounded with promising profit growth in 2019. The total assets of the Kingdom’s five largest banks increased by 16 percent to reach $453.2 billion. The banks’ combined loans and advances expanded by 15 percent to $266.6 billion, with an impressive 30 percent growth in profits totalling to $9.1 billion from $7 billion in 2018.

Saudi banks see a new wave of mergers and acquisitions
Another notable event which took place last year was the merger of Alawwal Bank and the Saudi British Bank leading to a structural change in the industry. Also, the Saudi Arabian Monetary Authority granted two new banking licences to Credit Suisse and Standard Chartered Bank. Despite the pandemic, it appears that there is room for new establishment of banks in the Kingdom. For example, the National Commercial Bank which is the Kingdom’s largest bank by assets is likely to acquire rival Samba Financial Group. Under the terms of the proposed deal, the National Commercial Bank has offered to pay $15.6 billion to Samba Financial Group at a premium of 27.5 percent to the latter’s share price. It is anticipated that the consolidation will create the third largest lending in the region with total assets of approximately $210 billion, put behind Qatar National Bank and First Abu Dhabi Bank.

In this context, Christos Theofilou, a senior analyst at Moody’s, told the media, “NCB would benefit from Samba’s strong corporate and investment banking franchise and well-established risk management practices. The merger would combine NCB’s large franchise across most business lines and mass retail capabilities with Samba’s upper-middle-income retail presence and well-established corporate banking franchise.”

Even prior to the pandemic, the Kingdom and the wider GCC were on the brink of a new wave of mergers and acquisitions to boost competitiveness, reduce operating costs and increase capital amid slow economic growth. The Saudi Arabian Monetary Authority is also processing additional applications for two traditional and one digital banking licences. In fact, the regulator has accelerated the application process for banking licences — making the Kingdom an attractive hub for banks seeking to foray into the domestic market in the future.

Are Saudi banks equipped for the pandemic’s distress?
Truth be told, the Kingdom’s banking industry started this year on a promising note, with 13 local banks offering services to a population of more than 30 million people. But as experts have emphasised the long-standing effects of the pandemic on the industry, the scale of the impact could be significant on its asset growth through this year. This is despite the fact that the Kingdom’s banks have strong capabilities to remain profitable over looming difficulties — as was the case in the past.

For example, the Saudi Arabian Monetary Authority experienced its first complexity in the 1960s when a number of non-performing loans established by Al Watany Bank led to the collapse of a major financial institution. This in turn had a residual effect on the regulatory framework governing the banking industry.

The Saudi Arabia Monetary Authority has provided support for domestic banks by rolling out a myriad of measures in response to the pandemic. These measures include funding to help companies maintain employment levels, support banks customers who have lost jobs, restructure loans without additional fees, waive off charges for accounts holding below minimum balances, refunds for customers on currency exchange fees during travel plans.

In March, the Saudi Arabia Monetary Authority introduced the Private Sector Financing Support Programme to strengthen financial stability and support the government’s efforts to protect businesses worst affected by the pandemic. The programme seeks to allocate $13.3 billion in loan guarantees for the sake of deferred payments and direct funding for lending.
The long-standing impact of the pandemic
But in the midst of a protracted pandemic causing global recession — what is the impact on the domestic banking industry? Is the industry prepared to fight the downside effects of the pandemic? Will the pandemic undermine the industry’s asset growth?

It is certain that declining oil prices and Covid-19 pandemic in early 2020 is posing great challenges for the global banking industry. In this context, Ovais Shahab, Head of Financial Services, at KPMG Saudi Arabia, told International Finance, “In 2020, the majority of banks across the world will inevitably face challenges, and the Saudi banking sector is no exception. However, the resilience and strength of the Saudi banking system will allow it to cushion the economic fallouts of Covid-19.”

S&P Global Ratings in a report titled Saudi Banking Sector 2020 Outlook: Risks Contained Despite Higher Credit Growth noted that the profitability of the Kingdom’s banks could lower slightly on the back of softening monetary policy and rates decline. That said, in another report titled Banks In Emerging Markets: 15 Countries, Three Main Risks,

the ratings firm expects the credit losses to stabilise with the help of steadying economy and mortgage-led lending growth. In fact, S&P has praised the Saudi Arabian Monetary Authority for keeping a good track record. Last September, the long-term rating on banks stood at BBB+ in line with a stable outlook.

Now the domestic banks seek to expand beyond competitive corporate and retail segments in the long term — extending their services to underserved market segments such as smaller enterprises and microfinance. In the first quarter of 2020, the Kingdom’s banking industry saw 13 locally licenced banks, of which, five of them held total assets worth more than $53.2 billion.

Banking performance in 2020 — an overview
In March, the central bank foreign exchange reservesdropped at its fastest rate in at least 20 years — and the Kingdom’s budget deficit dropped to $9 billion in the first quarter as oil revenues crashed.

“With the dissemination of financial results for the first quarter of financial year 2020, the magnitude of the pandemic impact on the banking industry has unfolded. The banking sector has reported an average increase of 93.3 percent in expected credit losses for the first three-month period and significant declines in market valuations since December 2019,” Shahab explained. “Nonetheless, healthy credit underwriting until February 2020 enabled total assets to rise 3.9 percent to SAR 2,540 billion ($677 billion), while total customer deposit edged up 1.5 percent to reach ($489 billion). Total gross loan book also posted an average growth of 4.9 percent. Despite the hike in expected credit losses, a substantial amount of income in the form of a SAR 1.12 billion government grant resulting from Saudi Arabian Monetary Authority support measures which have restricted the decline in net profitability only to 6.9 percent, relative to the same period of financial year 2019.”

The consequences of the pandemic for the banking industry in the Kingdom and globally is still unclear. But the consensus among economists is that there will be a slowdown in activities and a downward revision in GDP growth targets for 2020. For that reason, most governments have outlined inducement measures to sustain the economy and protect the core of the banking system in the long term.

SAMA issues measures to preserve the core banking system
A report published by KPMG said that the Saudi Arabian Monetary Authority has issued a myriad of measures and guidelines for banks and financial institutions in the Kingdom to cope with the pandemic’s distress. For example, it has introduced a Private Sector Financing Support Programme with a total value of SAR 50 billion.

In theory, the regulator has introduced key financial support programmes and qualitative measures through commercial banks. The support programmes comprise allocation of a SAR 30 billion stimulus package for banks and financing companies to delay SME dues for six months of its date, provide concessional finance of nearly SAR 13.2 billion for SMEs by granting loans from banks, allocation of SAR 6 billion for MSME sector to facilitate secure financing for banks under the Kafalah SME Loan Guarantee Programme and support the ecommerce sector by bearing the costs for point of sales and ecommerce services.

That said, the qualitative measures include extending working capital finance to all corporates to meet short-term liquidity requirements, flexibility in repayments of consumer finance to individuals who have lost their jobs due to the pandemic, waiver of all fees in the use of digital banking, waiver of minimum deposit balance requirement for up to six months and review credit card interest rates adjusting them to reasonable APR rate.

The regulator has been quite responsive to the current situation and has injected $13.3 billion into the banking industry as they prepare to resume operations. Shahab said, “The stimulus package has aimed to enhance the liquidity, as well as enable banks to continue providing credit facilities to their clients. The central bank’s decision to inject such a large amount of cash into the banking sector in the form of a one-year free deposit is rooted in its role of promoting financial stability. It will further help the wider banking sector to continue to provide credit to borrowers during this challenging period.”

The amount was injected in an effort to ensure the banking industry is able to continue lending to private firms on the back of slow economic recovery. The regulator said in a statement that the banking industry remains strong with assets up 14 percent in the first quarter of 2020 compared to the previous year.

It appears that banks are relatively high on liquidity compared to the pre-Covid-19 period, observed the KPMG report. Shahab further explained that “The Saudi Arabian Monetary Authority has always made sure there is enough liquidity in the monetary system in general and in the banking sector in particular. Such support is part of several financial stimulus programmes spearheaded by Saudi Arabian Monetary Authority since the start of Covid-19 outbreak Its ongoing support to banks through liquidity and relief, amplified by recently announced measures, has been the key mitigant to combat the impact on the banking industry.

“A robust support programme by the apex bank suggested that panic-driven measures such as foreclosures, uneconomical debt restructurings and forced liquidations have not been rampant. These measures have been a breath of fresh air not just for the corporates, primarily the micro, small and medium enterprises (MSME) sector, in addition to banks as they combat the economic fallout on the front lines.”

Finance Minister Minister Mohammed Al Jadaan said that the Kingdom must reduce expenditures to mitigate the negative economic effects of the pandemic. “Saudi Arabia is committed to protecting itself from the economic fallout of the Covid-19 pandemic through any necessary financial measures despite plunging oil revenues,” the Finance Minister told the media. The Saudi Arabian Monetary Authority confirmed that the Kingdom’s foreign assets have dropped to $464 billion — marking its lowest record in 19 years as it combats economic fallout.

KPMG’s ‘cautious optimistic’ outlook explained
Against this background, KPMG conducted a survey on C-suite executives to fully understand the severity and duration of the pandemic’s impact and the banks’ preparedness to strategies undertaken by the regulator and the government. The first point emphasises 10 percent to 20 percent of the loan book for more than half of the banks need to undergo restructuring changes. The second point highlights that SME financing is the most impacted followed by consumer and corporate banking. The third point notes that banks consider Saudi Arabian Monetary Authority’s plans to be highly comprehensive and sufficiently focused on all business segments.

The KPMG report also pronounced the fact that it is important for banks in the Kingdom to assess whether the credit risk on a financial instrument has increased since initial recognition. However, the rising challenge for the banks is to incorporate predictions associated with the economic impact of the pandemic. In fact, the report has expressed ‘cautious optimism’ for the domestic banking industry.

“The financial trends identified by KPMG’s analysis for 2019 were mostly positive, and particularly impressive, given the unique political and economic circumstances the region has witnessed in recent years, reflecting the continued resilience of the Kingdom’s banking sector. Saudi Arabia’s 11 listed banks reported an asset growth of 12 percent to $652 billion during the fiscal year 2019, with a healthy 40.9 percent growth to $12.03 billion in net profit. Our evaluation of the key financial indicators for the past year suggests growth and a positive outlook for the banking environment in the Kingdom, fueled by a proactive government and bespoke initiatives by the regulators,” Shahab said. “However, banks that are agile, flexible and willing to transform their business models will succeed, and secure their financial strength for future growth, while those that rest on their laurels will be left behind. Of late, the Covid-19 situation has not only tested the strong capitalisation and high profitability of the sector but indicating a dynamic shift in investment towards digital platforms and omnichannel functionalities. Looking forward, KPMG’s key predictions for 2020 include continued customer focus through innovation, cost and operational efficiencies to remain a priority, limited asset and profit growth, increasing capital and fundraising activity, further consolidation and rethinking of business models.”

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The review will be led by Ron Kalifa OBE, former CEO of Worldpay.

The aim of the review is to establish priority areas for industry, policymakers, and regulators to explore in order to support the ongoing success of the UK fintech sector.

Ron Kalifa told the media, “Tech-based solutions in financial services have experienced wide-scale adoption in the UK, with growth fuelled by a favourable startup environment that supports entrepreneurship and innovation. This Review will ascertain what is required to accelerate this change, to create a financial services ecosystem that is above all, sustainable, inclusive and world-leading.”

“Technology has a vital role to play in the UK’s Covid-19 economic recovery. The fintech review will ensure that we can leverage this innovative technology to help consumers and businesses, through a joined-up strategy that combines investment, skills and policy to deliver it,” he added.

According to KPMG, the UK fintech sector is valued at $48.5 billion. Despite the current Covid-19 crisis, the sector is still providing attractive investor returns on paper, particularly for early-stage investors.

KPMG’s latest report Fintech Focus points out that annual losses for fintech startups in the UK are currently in the region of £1.5 billion and that the sector could need to raise £825 million to achieve 18 months of funding runway for every firm to see out the Covid-19 pandemic.

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The Middle East fintech study by Deloitte found that of the 18 percent unwilling to use fintech products, 40 percent cited security and privacy as their biggest concerns.

Rushdi Duqah, Deloitte Middle East Digital Leader told the media, “We hope to provide insights that increase transparency on the evolution of the Middle East fintech ecosystem, and to strengthen the cooperation between banks and fintechs, enabling banks to offer their customers innovative value propositions.”

The Deloitte study took into account the responses of some 1,500 banking customers and more than 50 digital leaders from Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, Oman, Egypt, Lebanon and Jordan. The study finds that there is limited alignment between customer expectations and bank offerings and the fintech ecosystem in the Middle East is characterised by a certain degree of contradiction and dichotomy.

The study further reveals that even though the fintech ecosystem is evolving, however, when it comes to funding and investment, the sector seems to be lagging behind in the region.

According to KPMG’s Pulse of fintech survey, fintech startups in the Middle East were involved in 2,693 deals in 2019 worth $135.7 billion.

The industry in the Middle East and North Africa region is set to attract $2.5 billion by 2022, according to a study by Mena Research Partners.

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Five years ago, Imperial Bank was placed under receivership on the basis of inappropriate banking practices.  It is reported that Kenya Deposit Insurance Corporation (KDIC) is appointed as the receiver by the Central Bank of Kenya.

Last month, Kenya Commercial Bank was granted approval by the Central Bank of Kenya and The National Treasury and Planning to acquire Imperial Bank, media reports said.

The Central Bank of Kenya in a statement said “CBK welcomes this transaction that marks a significant milestone in the resolution of Imperial Bank and enhances banking sector stability. It is reported that the amount will be paid to Imperial Bank depositors over a period of four years.

Kenya Commercial Bank will acquire certain assets and liabilities of Imperial Bank at a value of $29.8 million, media reports said. It comprises banking subsidiaries in Uganda, Tanzania, Rwanda, Burundi, Ethiopia, and South Sudan in East Africa.

As of March, Kenya Commercial Bank had a market share of 14.5 percent, media reports said. More recently, it was reported that the bank has replaced KPMG with PwC as its external auditor. Prior to this, KPMG had lost its banking client Absa Group.

PwC has been National Bank’s external auditor which was acquired by Kenya National Bank. Currently, KPMG, PwC, Ernst & Young and Deloitte are Kenya’s four major auditors. Last December, Kenya National Bank had recorded a 5 percent jump in profit after tax to Sh 25.2 billion.

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