General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
October 05, 2017

IMF published its staff report, selected issues report, and the financial system stability assessment (FSSA) report on Saudi Arabia. These reports are a part of the IMF's financial sector surveillance on Saudi Arabia. The reports, among other issues, examine the recent strengthening of regulatory and supervisory frameworks in Saudi Arabia, discuss the state of Basel III implementation, and look at ways of further improving the resilience of the financial sector.

The staff report reveals that banks are well-regulated and supervised. Directors welcomed the steps taken by SAMA to strengthen its regulatory and supervisory frameworks and to develop the macro-prudential framework and the financial safety net. They saw scope for the Saudi Arabian Monetary Authority (SAMA) to strengthen its liquidity management framework and encouraged the authorities to continue to address data gaps and subscribe to the Special Data Dissemination Standard. Efforts by the Capital Market Authority to develop the local capital markets were also welcomed. The selected Issues report examines the decline in inflation, along with the appropriate scope and pace of fiscal adjustment in Saudi Arabia.

The FSSA report highlights that, since the 2011 Financial Sector Assessment Program (FSAP), the authorities have implemented the Basel III framework (in 2013) for capital and liquidity and made progress with several other recommendations; strengthened the stress testing framework; implemented an early warning system; set limits on banks’ large exposures; prepared a draft resolution law that broadly corresponds to the FSB’s Key Attributes for Effective Bank Resolution; and created a high-level Financial Stability Committee in SAMA, which is charged with macro-prudential analysis and supporting the work of the National Financial Stability Committee. Banks—the core of the Saudi financial system—remain liquid and resilient. In the fourth quarter of 2016, the total regulatory capital ratio for the system was 19.5%, with little variation across banks, and the (unreported) common equity tier 1 ratio was estimated at 17.5%. Banks increased their capital buffers and provisions for coverage of nonperforming loans, the latter rising to 177% by the end of 2016. At the end of 2016, all banks met the standard Basel III liquidity coverage ratio, or LCR, requirement and passed the maturity-mismatch test, owing to their large holdings of liquid assets. Stress tests show that most banks, including all systemically important banks, would be able to continue operating and meeting regulatory capital requirements in the event of additional severe economic shocks.

Additionally, the FSSA report highlights that Saudi Arabia has a mixed system, in which Islamic banks (offering exclusively Islamic products on both sides of the balance sheet) operate alongside “hybrid” banks, which offer both Islamic and conventional products. SAMA supervises all banks under the Basel framework, using the same reporting requirements and standards. This approach has served Saudi Arabia well so far. Nevertheless, given the unique risk profile of Islamic products, SAMA should consider applying the Core Principles for Islamic Finance Regulation, recently established by IFSB, once these are ready for implementation. SAMA should issue guidance to banks on mapping the risk profile of Islamic products to the Basel framework. This will facilitate the determination of prudential reporting for Islamic products.


Related Links

Keywords: Middle East and Africa, Saudi Arabia, Banking, Islamic Banking, Article IV, Basel III, FSSA, FSAP, IMF

Related Insights

PRA Delays Final Direction on Reporting of Private Securitizations

PRA and FCA have delayed the issuance of final direction, including the final template, on reporting of private securitizations, from January 15, 2019 to the end of January 2019.

January 15, 2019 WebPage Regulatory News

BCBS Finalizes Market Risk Capital Framework and Work Program for 2019

BCBS published the final framework for market risk capital requirements and its work program for 2019. Also published was an explanatory note to provide a non-technical description of the overall market risk framework, the changes that have been incorporated into in this version of the framework and impact of the framework.

January 14, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for January 2019

EBA published answers to 13 questions under the Single Rulebook question and answer (Q&A) updates for this week.

January 11, 2019 WebPage Regulatory News

PRA Proposes to Amend Supervisory Statement on Credit Risk Mitigation

PRA published the consultation paper CP1/19 that is proposing changes to the supervisory statement (SS17/13) on credit risk mitigation.

January 10, 2019 WebPage Regulatory News

FASB Issues Q&A on Estimating Credit Loss Reserves

FASB issued a question-and-answer (Q&A) document that addresses particular issues related to the weighted average remaining maturity (WARM) method for estimating the allowance for credit losses.

January 10, 2019 WebPage Regulatory News

FED Updates Reporting and Supplemental Instructions for Form FR Y-9C

FED published the updated reporting instructions and supplemental instructions for the FR Y-9C reporting form. The reporting frequency for FR Y-9C is quarterly, as of the last calendar day of the quarter.

January 09, 2019 WebPage Regulatory News

PRA Updates Policy on Liquidity Reporting Under FSA047/048 and PRA110

PRA published the policy statement PS1/19 that provides feedback to responses to the consultation paper CP22/18 titled "Liquidity reporting: FSA047 and FSA048" and the proposal in CP16/18, which intended to correct the level of consolidation of the PRA110 reporting requirements.

January 08, 2019 WebPage Regulatory News

FED Proposes to Amend Company-Run Stress Testing Requirements

FED proposed to modify company-run stress testing requirements to conform with the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

January 08, 2019 WebPage Regulatory News

ESMA RTS on Supervisory Cooperation Under Securitization Regulation

ESMA issued the final regulatory technical standards (RTS) for cooperation between competent authorities and ESAs under the Securitization Regulation (2017/2402).

January 08, 2019 WebPage Regulatory News

ESAs Publish Joint Report on Regulatory Sandboxes and Innovation Hubs

ESAs published a joint report providing a comparative analysis of the innovation facilitators (that is, regulatory sandboxes and innovation hubs) established to date within the EU.

January 07, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2461