Governor Abdalla made his remarks during the 20th annual High-Level Meeting on Financial Stability and Regulatory and Supervisory Priorities.
According to a cabinet statement, Wednesday’s sessions focused on risks and trends in Arab financial systems, policies to support financial stability and growth, developing supervisory processes, regulating stablecoins, managing AI-related risks, and liquidity management.
The meeting was organized by the Arab Monetary Fund, the Financial Stability Institute (FSI), and the Bank for International Settlements’ Basel Committee on Banking Supervision (BCBS).
Several central bank governors from Arab countries, like Bahrain, Tunisia, Palestine, and Lebanon, attended the meeting.
Abdalla emphasized that these topics are crucial for stabilizing the economy during the current transitional phase, amid rising inflation, liquidity volatility, and geopolitical shifts.
He noted that these challenges have forced central banks in the region to prioritize protecting monetary stability, enhancing economic resilience, and building flexible financial systems to ensure sustainable growth, absorb unexpected shocks, and maintain market confidence.
High public debt, fluctuating exchange rates, and volatile oil and gas prices further impact public finances, economic activity, and investor expectations.
Abdalla also highlighted the growing role of non-bank financial institutions, whose assets now account for about 50 percent of global financial assets. While these entities are important for promoting economic growth and financial inclusion, they carry higher risks and require advanced and transparent regulatory frameworks.
He said the use of digital assets and stablecoins has become essential for cross-border payments and transfers, doubling in value over the past three years due to AI improvements.
These tools also enhance monitoring and analytics but carry risks such as regulatory inconsistencies, bias, data protection issues, and increased cyber threats, creating a need for secure digital infrastructure and updated legislation.
Abdalla warned that weak governance, unsustainable business models, and insufficient regulation and supervision contributed to four banks halting operations in 2023.
Factors included inadequate liquidity standards and the rapid pace of digital withdrawals and instant fund transfers.
He stressed the need to update banking stress tests, improve operational readiness, and implement proactive supervision for early risk detection.
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