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1. Introduction

No: 43038156 Date(g): 2/12/2021 | Date(h): 27/4/1443 Status: In-Force

Effective from May 01 2022 - Apr 30 2022
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This Risk Management Framework for shari’ah compliant Banking is issued by SAMA in exercise of the powers vested upon it under its charter issued by the Royal Decree No. M/36 on 11-04-1442H (26 Nov 2020G) and the Banking Control Law issued by the Royal Decree No. M/5 on 22-02-1386H (26 June 1966G) and the rules for Enforcing its Provisions issued by Ministerial Decision No 3/2149 on 14-10-1406AH
 
In February 2020, SAMA has issued Shari’ah Governance Framework for enhancing governance, risk management and compliance practices of Banks conducting Shari'ah compliant Banking. The Risk Management Framework for Shari'ah compliant Banking provides 2 set of rules for establishing and implementing effective risk management in Banks offering Shari'ah compliant product and services. The Risk Management Framework for Shari'ah compliant Banking will further complement and enhance the current Risk Management regime by identifying and suggesting techniques to manage various types of risks unique to Shari’ah compliant Banking. The Risk Management Framework for Shari'ah Compliant Banking should be considered in addition to the various risk management regulations and guidelines issued by SAMA from time to time and Banks will be required to comply with all sets of rules and guidelines. Shariah compliant Banking products and services are also exposed to various types of risks including the following major categories of risks: 
 
 Credit risk
 
 Equity investment risk
 
 Market risk
 
 Liquidity risk
 
 Rate of return risk
 
 Operational risk
 
SAMA will roll out the Risk Management Framework for Shari’ah Compliant Banking in phases. This will allow a reasonable timespan for Banks to implement various rules stipulated in each phase of the framework. In the first phase, this circular specifies rules regarding overall management of the risks by Banks conducting Shari'ah compliant Banking as well as 2 minimum set of regulatory requirements for managing market risk and operational risk relating to Shari’ah compliant Banking.