The Central Bank of Saudi Arabia announced the start of the official implementation of the recent Basel (3) reforms in local banks, starting from January 1, 2023 AD, in line with the internationally agreed timetable, and decided by the Basel Committee on Banking Supervision (BCBS), which is the body concerned with setting international standards for prudential supervision of banks.
The Central Bank stated in a statement, today, Wednesday, that the recent Basel (3) reforms issued by the Basel Committee in December 2017 AD, which complemented the Basel (3) standards issued in 2010 AD, aim to raise the level of confidence in the methodology for calculating risk-weighted assets by improving the sensitivity of The standard method used in its calculation.
It also aims to reduce reliance on the internal regulations approach, in addition to enhancing risk-based capital by reviewing the financial leverage framework and the minimum outputs for calculating risk-weighted assets (Output Floor).
The Central Bank indicated that, in line with these reforms, it has worked to update the framework of precautionary instructions related to capital risks in local banks, out of fulfillment of the Kingdom’s obligations as a member of the Group of Twenty, and as a continuation of the Central Bank’s endeavor to make the Kingdom one of the first countries in applying the standards. international. This comes based on the powers vested in the Central Bank of Saudi Arabia according to its system issued by Royal Decree No. (M / 36) dated 04/11/1442 AH, and the Banking Control Law issued by Royal Decree No. (M / 5) dated 02/22/1386 AH.
During the second half of 2022, the Central Bank of Saudi Arabia carried out a pilot application of the recent Basel (3) reforms with the participation of all local banks, and its preliminary results showed that the banking sector is ready for official application, while continuing to maintain stable capital levels, which contributes to achieving the objectives of Central Bank to maintain the stability of the financial sector.