SIFI law has ‘very special’ nature with narrow scope of application: SAMA official

The law on treatment of systemically important financial institutions (SIFIs) has a “very special nature” as its application scope is very limited, CNBC reported, citing SAMA’s General Director of Legal Affairs, Mohammed Alabduljabbar.

The Saudi Central Bank (SAMA) also has special powers with regard to this law, Alabduljabbar noted.

The new SIFI law creates clear legal frameworks that provide speed and effectiveness through prior planning, to overcome any disruption in those important financial institutions.

Accordingly, this law provides further protection for the financial sector and its participants, maintains important financial services, and reduces dependence on government support.

Alabduljabbar clarified that the important financial institutions are those that have a high impact on the financial system in general.

He added that SAMA will set standards for the financial institutions under its supervision, which are related to their size, assets, and associated risks. In addition, these standards will also be related to the nature of activities that are necessary for the national economy in general, and the interconnection of these activities and institutions internally and externally with other financial institutions.

According to data compiled by Argaam, the Saudi Cabinet approved a law on treatment of SIFIs, which allows SAMA to effectively monitor such institutions, maintain the financial sector’s stability and insulate the financial system against any negative impact.