BCBS Assesses Implementation of NSFR and LE Framework in Saudi Arabia
BCBS published two reports assessing the implementation of the net stable funding ratio (NSFR) and the large exposures (LE) framework in the Kingdom of Saudi Arabia. These reports are a part of the Regulatory Consistency Assessment Program (RCAP) of the Basel Committee. Overall, the NSFR regulations and the LE framework in the Kingdom of Saudi Arabia have been found to be "compliant" with the Basel standards. This is the highest of the four possible assessment grades.
BCBS has completed the assessments of implementation of Basel III capital and liquidity coverage ratio regulations for all the member jurisdictions. Assessments of implementation of Basel III standards related to the NSFR and large exposures framework started in 2018 and are expected to be completed by September 2020. SAMA had implemented NSFR as a minimum standard as of January 01, 2016. SAMA also implemented the large exposures framework as a minimum standard on January 01, 2016, which is three years ahead of the implementation date provided in the Basel standard. In Saudi Arabia, both regulations are applicable to all 12 locally incorporated banks on a consolidated basis.
The large exposure limits help constrain the maximum loss a bank could face in the event of a sudden failure of a counterparty or a group of connected counterparties and help ensure the bank remains a going concern. NSFR, which is a significant component of the Basel III reforms, requires banks to maintain a stable funding profile in relation to their on- and off-balance sheet activities, thus reducing the likelihood that disruptions to a bank's regular sources of funding will erode its liquidity position in a way that could increase the risk of its failure. NSFR standard of BCBS became a minimum standard by January 01, 2018.
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Keywords: Middle East and Africa, Saudi Arabia, Banking, Basel III, RCAP, Large Exposures, NSFR, BCBS
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