Regulatory Alerts2016-02-09
Minimum Capital Requirement for Market Risk – New Standard
The Saudi Arabian Monetary Agency has issued a new standard establishing revised minimum capital requirements for market risk to replace the existing Basel II framework. This updated regulatory framework introduces a more rigorous Internal Models Approach and Standardised Approach, shifts the risk measurement from Value-at-Risk to Expected Shortfall, incorporates market illiquidity horizons, and establishes a clearer boundary between trading and banking books. Banks must form a dedicated working group by February 2016, finalize reporting templates and guidelines through September 2016, complete a transitional implementation period in 2017, and achieve full compliance by January 2018.
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