When the central bank wants to exert downward pressure more directly on long-term interest rates, it can absorb duration risk from the market by purchasing securities of relatively longer maturity. This frees up more risk-bearing capacity for investors, which they can redeploy towards bearing different types of risk, including equity and credit risk. In the aftermath of the financial crisis, restoring risk appetite has been a key condition for stimulating economic activity. And as inflation convergence proceeds only slowly, continued monetary stimulus is still needed today. This begs the question whether the persistent monetary accommodation that is needed for inflation convergence could bring about excessive risk-taking and contribute to financial stability risks down the road. Risks to financial stability can build up when low interest rates interact with distorted incentives in the financial sector, which arise from information frictions in credit markets and externalities that have not been properly addressed by regulation and supervision. Key financial vulnerabilities include excessive dependence on unstable short-term funding, too much leverage, inadequate capital provision for risk exposure and a weak underwriting of loans. Macroprudential policy 2/5  BIS central bankers' speeches  The regulatory and supervisory overhaul that took place in the aftermath of the crisis aims to ensure high-level resilience in the financial system, contain the inherent pro-cyclicality within the financial system and take into account systemic negative externalities and system-wide feedback loops. By design, this should limit excessive risk-taking in the financial sector resulting from periods of accommodative monetary policies.
The share of private sector gross product, which SMEs are part of, is 33 percent, while the share of SMEs in GDP is 57 percent in Japan, 64.3 percent in Spain, 56 percent in France, 44 percent in Austria, 43 percent in Canada, 33 percent in Australia and more than 50 percent in the United States. The SME’s modest contribution to GDP in Saudi Arabia could be ascribed to the immensity of the oil and public sectors, being the main catalyst for economic activity. SMEs coverage in the national income accounts might be low. Dear audience, Small and medium enterprises are facing clear challenges to obtain the necessary funding to meet their expansion needs because of several reasons; one of which is the lack of guarantees for granting credit. To overcome this problem in the Kingdom, the Ministry of Finance, in cooperation with Saudi banks, has established “Kafalah Program” for financing small and medium enterprises. It is a program administered by the Saudi Industrial Development Fund with a capital of Rls 200 million to cover a proportion of the risk of the funding entity in case the guaranteed enterprise fails to repay the finance or part thereof, and to encourage banks to finance viable small and medium enterprises, which cannot provide the necessary guarantees or accounting records that prove their eligibility for funding. The program has been performing well since its inception in 2006 up to the end of 2010.