Regulatory Alerts1442-04-08
Circular Re. The Rules Governing Credit Risk Exposure Classification and Provisioning for Finance Companies
The Saudi Arabian Monetary Authority (SAMA) issued rules requiring finance companies to classify credit exposures into three stages based on significant increases in credit risk and to calculate Expected Credit Loss (ECL) provisions in accordance with IFRS 9. The regulations mandate robust governance frameworks, including clear roles, model validation, and qualitative adjustments, to ensure adequate provisioning for contingent losses. Finance companies must implement these requirements by July 1, 2021, mapping their internal classifications to SAMA's regulatory categories for prudential reporting.
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