Regulatory Alerts2012-10-22
SAMA Finalized Guidance on Basel II.5 Standardized and IRB Approaches
The Saudi Arabian Monetary Authority (SAMA) issues finalized guidance establishing capital adequacy requirements for implementing Basel II.5, mandating compliance with Credit and Market Risk frameworks under both Standardized and Internal Ratings-Based approaches alongside Pillar 2 ICAAP and Pillar 3 disclosure rules. The framework takes effect on January 1, 2013, requiring banks to submit their first quarterly prudential returns for data as of March 31, 2013 by April 30, 2013. Foreign bank branches are exempt from direct submission as SAMA coordinates their capital adequacy planning with home supervisory authorities.
.. Banking Supervision Dept. • SAMA - Basie II Prudential Returns Circular # BCS 180 of 22 March 2007. • SAMA Basie II Guidance Document to banks in Saudi Arabia of 6 June 2006. • SAMA Amended IRB Prudential Return and Guidance Notes of 18 January 2012 Circular# BCS 5318. While SAMA's implementation framework incorporates i) Credit Risk and ii) Market Risk for both the Standardized and IRB Approaches, the latter would only be applicable where SAMA granted an approval to use IRB approaches. With regard to implementing models in the context of Basel 11.5 Market risk, SAMA has decided to wait until substantial Trading Book issues under review in the BCBS are resolved. These were documented in the BCBS document of May 2012 entitled "Fundamental Review of the Trading Book". With regard to Operational Risk, there were no refinements under Basel 11.5. It should be noted that these Prudential Returns are not applicable to branches of foreign banks as the Agency will discuss the· Basie 11.5 implementation with their Head Offices and Home Supervisory Authorities, and ensure that they include the branches in Saudi Arabia in their Capital Adequacy plans. B. Pillar 2 • Basel 11.5 Pillar 2 ICAAP Requirements
- Please refer to page 40. C. Pillar 3 • Basel 11.5 Pillar 3 Disclosure Requirements
- Please refer to page 42. SAMA Basel 11.5 Framework will be effective 1 January 2013 and Banks will submit their first quarterly prudential returns for data as of 31 March 2013 to be sent to SAMA by 30 April 2013. g \ Abdulrahman A. Al-Kalaf Deputy Governor for Technical Affairs 2 P. 0. Box 2992 - Riyadh 11169, Saudi Arabia - Tel.: 0 1-463 3000 - Telex 404390 SJ - Fax 01-466 2119