SAMA says Basel III reforms drives risk management at banks

The Saudi Central Bank (SAMA)

The Saudi Central Bank (SAMA) said that the latest Basel III reforms complement the Basel III standards which were earlier applied in the Kingdom. These reforms aim to improve the sensitivity of the standardized approach (SA) used in calculating banks’ capital requirements, which in turn will help banks manage risks based on the activity of each bank.

In a phone call with Argaam, SAMA stressed that the capital adequacy ratios (CAR) of banks fall within the regulatory limits set by the central bank and international standards. This enhances banks’ capability to provide finance and contribute to the Kingdom’s economic growth.

The Basel III reforms include amendments to capital requirements for market and credit risks, operational risks, in addition to financial leverage. Minimum requirements for the calculation of capital ratios were also introduced, and the disclosure requirements in Pillar 3 were also updated.

The reforms also focus on requirements for risk-weighted capital, but exclude any update on liquidity or provision requirements, SAMA added, noting that it regularly revises all prudential policies to address any gaps.

The banks operating in Saudi Arabia are among frontrunners to apply these reforms. This will strengthen the Kingdom’s banking sector and help banks fulfill their obligations, in line with Saudi Arabia’s membership in the G20.