Regulatory Alerts2016-06-20
Capital Requirements for Banks' Equity Investments in Funds
The Saudi Arabian Monetary Agency (SAMA) has issued capital regulations for all banks, effective 1 January 2017, to standardize risk-based capital calculations for equity investments in funds. The framework mandates three calculation methods—the Look-Through, Mandate-Based, and Fall-Back Approaches—while incorporating fund leverage and clarifying Internal Ratings-Based credit risk applications. Additionally, the rules impose a 1250% risk weight on investments lacking sufficient transparency regarding underlying fund activities.
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