Regulatory Alerts2015-07-08
Treatment of High Quality Liquid Assets in Host Jurisdictions
The Saudi Arabian Monetary Agency (SAMA) requires Saudi banks with overseas branches and subsidiaries to apply the more conservative treatment of either SAMA's or the host jurisdiction's rules for Level 1 High Quality Liquid Assets (HQLA) and its repo facility when calculating consolidated Liquidity Coverage Ratio (LCR). This directive follows SAMA's recent circular dated July 8, 2015, which increased the repo facility for Level 1 HQLA from 75% to 100% for banks within the Kingdom of Saudi Arabia. SAMA acknowledges that host jurisdiction LCR requirements regarding HQLA haircuts or related repo facilities may not align with its own, necessitating this conservative approach for consolidated reporting.
Saudi Arabian Monetary Agency
BANKING CONTROL
From : Saudi Arabian Monetary Agency (SAMA)
To : All Banks
Attention : Managing Directors, Chief Executive Officers and General Managers
Subject : Treatment of High Quality Liquid Assets (HQLA) in host jurisdictions
SAMA has recently issued a circular dated 8 July 2015 regarding a change in repo facility for level 1 HQLA assets from 75% to 100%. This means that Banks in the KSA can now access liquidity from SAMA for up to 100 % of their investment in Saudi Government Bonds and SAMA Bills.
SAMA is aware that Saudi banks with overseas branches and subsidiaries have to meet LCR requirements of their host jurisdictions. However, these requirements concerning haircuts on level 1 HQLA or related repo facility may not be totally in sync with SAMA requirements.
Consequently in view of the section as stated below:
Scope Of Application (paragraphs 164 to 172) of the Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tool dated January 2013
SAMA would like Saudi banks to apply the more conservative treatment of the rules of SAMA or host jurisdiction for level 1 HQLA and its repo facility for the purpose of consolidated LCR calculation.
[Signature]
Osamah M. Shaker Director General of Banking Control
مؤسسة النقد العربي السعودي الرقم : 361000126260 التاريخ : 1436/09/21 المرفقات :
P.O. Box 2992 - Riyadh-11169, Saudi Arabia - Tel : 011-463 3000 - Telex 404390 SJ - Fax : 011-463 2090