SAMA to begin Basel III final reforms implementation on Jan. 1

Logo of The Saudi Central Bank (SAMA)

The Saudi Central Bank (SAMA) announced that the official implementation of Basel III final reforms by Saudi banks will be as of Jan. 1, 2023.

This comes in line with the internationally-agreed timeline set by the Basel Committee on Banking Supervision (BCBS), the global standard-setter for the prudential regulation of banks, according to a statement.

The reforms were issued by the BCBS in December 2017. They complement Basel III standards, issued by the BCBS in 2010, with the aim of restoring creditability in the calculation of risk-weighted assets (RWA) by improving the sensitivity of the standardized approach (SA) used in calculating them, and reducing the reliance on the internal ratings-based approach (IRB). It also aims to complement the risk-weighted capital ratio with a revised leverage framework and minimum outputs for calculating risk-weighted assets (Output Floors), the central bank added.

SAMA also indicated that it has updated the prudential framework for Saudi banks' capital risks to align with these reforms as part of its commitment to fulfil the expectations from Saudi Arabia as a member of the G20. This is in continuation of its endeavor to making the Kingdom one of the leading countries in applying international standards.

This also comes based on the powers vested in SAMA under its law issued by Royal Decree No. (M/36) dated 11/04/1442 and the Banking Control Law issued by Royal Decree No. M/5 date 22/02/1386.

SAMA has also carried out a pilot application of Basel III, which was launched during the second half of 2022, with the participation of all Saudi banks. For starters, the pilot application demonstrated the readiness of the banking sector for the official implementation while maintaining stable capital levels. It contributes to achieving the central bank’s objective to maintain financial stability.