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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:
Category (and weighting)
Individual Indicator
Indicator weighting
Size (30%)
Total exposure as defined for use in the Basel III leverage ratio
30%
Intra-financial system assets: due from commercial banks, specialized banks, and other financial institutions.
10%
Interconnectedness (30%)
Intra-financial system liabilities: due to ommercial banks, specialized banks, and other financial institutions.
10%
Total Marketable securities
10%
Complexity (10%)
OTC derivatives notional value
10%
Substitutability (30%)
Payments cleared and settled 30 through payment system
