II. The Assessment Methodology
Effective from Sep 18 2017 - Dec 31 2015
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| 4. | The assessment methodology for D-SIBs reflects the potential impact of, or externality imposed by, a bank's failure. Thus, the reference system for assessing the impact of failure by D-SIBs is the domestic economy. | |||||||||||||||||||||||||
| 5. | The impact of a D-SIB's failure on the domestic economy, or the assessment and designation of D-SIBs in Saudi Arabia should, in principle, be assessed annually having regard to bank-specific factors combined with SAMA's discretion (based on supervisory judgment). Thus, the assessment and designation process for D-SIB’s by SAMA will take place in February of each year based on end year data. | |||||||||||||||||||||||||
| 6. | D-SIB’s identified and designated by SAMA under this methodology will be required to comply with the Higher Loss Absorbency (HLA) measures with effect from January 2016. | |||||||||||||||||||||||||
| 7. | The bank’s degree of systemic importance should be assessed at a consolidated level. The methodology of designation for the D-SIBs in Saudi Arabia is based on four categories with different weights, and each category weight differs, based on the sub-category that has the: | |||||||||||||||||||||||||
| I. | Size of the bank as total exposures, as measured in the leverage ratio under Basel III. | |||||||||||||||||||||||||
| II. | Interconnectedness of the bank vis-à-vis other financial institutions; the three indicators are used to measure interconnectedness: (i) intra-financial system assets, (ii) intra-financial system liabilities, and (iii) total marketable securities. | |||||||||||||||||||||||||
| III. | Complexity of the bank by measuring the notional amount of over-the-counter derivatives (OTC). | |||||||||||||||||||||||||
| IV. | Substitutability which relates to the bank’s activities and implications of its failure. | |||||||||||||||||||||||||
Below is a table that shows each category with its sub-category and weights:
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