Regulatory Alerts1999-03-09
Sound Practices for Banks' Interactions with Highly Leveraged Institutions (HLI)
The Saudi Arabian Monetary Agency (SAMA) distributed the Basle Committee on Banking Supervision's (BCBS) paper on 'Sound Practices for Banks' Interactions with Highly Leveraged Institutions (HLI)' to all Saudi banks. SAMA expects banks to manage HLI exposures according to existing internal control guidelines and prudent credit policies, specifically requiring them to ensure managers are conversant with the paper's best practices, internalize these into their credit and risk management policies, and develop a framework for regular identification, monitoring, and reporting of such exposures to senior management. This initiative, prompted by the near-collapse of Long-Term Capital Management, aims to encourage prudent approaches by banks to the assessment, measurement, and risk management of credit exposures to HLIs, including hedge funds, to enhance financial stability.