Yes, has been is grammatically correct, even in indirect speech in the past tense. Indeed, the tense (has been vs. had been) indicates an important distinction! Has been implies that what the speaker said is still relevant in the present. Had been would imply that the matter is closed.
The minister said that the matter has been taken up with Saudi authorities.
…implies that the Saudi authorities are now considering the matter.
The minister said that the matter had been taken up with Saudi authorities.
…suggests that the Saudi authorities have finished considering the matter. In other words, the simple past combined with past perfect suggests the following sequence of events:
1) The Saudi authorities took up the matter.
2) The Saudi authorities made their decision.
3) The minister talked about it.
The sequence is not completely unambiguous, though. You could also say had been while the Saudi authorities are still considering, if you wanted to emphasize that the minister is no longer involved in the matter.
The way to understand the perfect aspect in English without trying to remember large numbers of rules is to understand that the speaker wants to point out a time interval, and the end of this time interval is suggested by the tense of "have". The speaker thinks that the distinction between during this time interval and after this time interval is important. Why the time interval is important depends entirely on context and doesn't follow a rule. Even the exact end of the time interval depends on context.
In your example, a fluent speaker understands (unconsciously) that the important time interval is the period during which the Saudi authorities consider the matter. So, the present perfect has been implies that the time interval is still in progress. The past perfect had been implies that the time interval ended in the past, hence the Saudi authorities' consideration of the matter ended in the past.
Or, in the alternate reading, had been would mean that the time interval of the minister's involvement in the matter ended in the past.
Police said they have arrested the terrorist.
According to grammar, ther's no need to bachshift the verb in reported speech if what a person said is still true or relevant. For example, if the terrorist has just been arested and is still in custody, not released, you don't need to backshift have.
However, to do so is optional: you can use have or had.
Best Answer
If the situation reported is still valid at the time of reporting, backshifting is optional. See Swan (2005) Practical English Usage, pages 275-6, for several examples.
John said that he would give me a pen. Correct in all situations.
John said that he will give me a pen. Possible if John has not yet given the pen to the speaker.
S2: I wanted to let you know that he had sent you an email. Correct in all situations.
S1: I wanted to let you know that he has sent you an email. Possible if the sending was so recent that 'you' may not yet be aware of this.