Regulatory Alerts2016-03-09
A circular dated March 9, 2016 regarding instructions for the internal assessment of capital adequacy
In this table, you can see the different scenarios and their respective consequences for your interest rate calculations. | Scenarios | For periods up to 6 months | For periods from 1 month to 6 months| For shorter periods (less than one month)| |------------------------------------|---------------------------------|-------------------------------------|----------------------------------------| | Larger than 6 months | Longest term lending rate | | | | Greater than 3 months but less than 6 months| Interest rates on excess reserves (based on average overnight rate) | | | | Less than 3 months but equal to or greater than 1 month | Stabilization Fund interest rates (based on annual average interest rate) | | | | Less than one month | Other investment income | | Interest income on other investments | For periods: - Up to 6 months, the base rate used is the overnight indexed swap (OIS) for 6-month maturities. - From 1 month to 6 months, the reference rate is the average of the daily overnight indexed swaps during the relevant period. - For shorter periods than one month, there are no specific rates provided but interest income on other investments may be used as a proxy. | | Over 20 years | For periods ending in 2020 | For periods ending in 2021 | |------------------------------------|-----------------------------------------|---------------------------------------------|----------------------------------------| | | Base rate used | Notes: - 1, The Bank of Saudi Arabia (SA) publishes its monetary policy using the overnight indexed swap (OIS), based on the daily OIS rates. However, in calculating your interest rates, you will need to apply these published rates according to your loan or deposit transactions with the bank. - 12, Tetymi Almouayia Tahhurat Ajmiya Alamalikum (SA) publishes its key macroeconomic data. These include data on its foreign reserves, its domestic financial system, and its balance sheet among other things. However, in understanding your interest rate calculations, you will need to apply these published data according to your loan or deposit transactions with the bank. - 13, The Central Bank of Saudi Arabia (SA) publishes the details on its financing mechanisms and the different types of investment it has. These include short-term investment options, longer-term investment options, and other investment income sources among other things. However, in understanding your interest rate calculations, you will need to apply these published data according to your loan or deposit transactions with the bank. So, for periods up to 6 months, the average overnight indexed swap (OIS) rate is used as a base rate. For periods from one month to six months, the average daily overnight indexed swap (OIS) rate for that specific period is applied. And finally, for shorter periods than one month, other investment income may be considered as a proxy. Remember, in all these scenarios, we are considering only the conventional banking practices and not including any unconventional financial or monetary instruments or any other forms of investments or borrowing methods within these scenarios.