Scope of Application
| No: 44047144 | Date(g): 27/12/2022 | Date(h): 4/6/1444 |
Effective from Jan 01 2023 - Dec 31 2022
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| 1. | Local banks must comply with SAMA’s Basel Framework (the Framework) at both standalone and consolidated level4. |
| 2. | For purposes of the Framework, the consolidation will include all subsidiaries undertaking financial or banking activities, which the bank have a majority ownership5 or –control, except insurance entities. |
| 3. | Where consolidation of a subsidiary is not feasible6, banks are required to seek SAMA’s approval to exclude the subsidiary from the scope of application and reporting requirements. The application should include proper justifications and risk management controls to ensure group risks are managed effectively. |
| 4. | Subject to SAMA discretion, the framework may apply to the bank subsidiaries at every tier or level within the banking group on a consolidated and/or on standalone basis, as applicable. In this regard, SAMA will, among others, take into consideration the type of subsidiary7, quantitative and qualitative factors such as size of assets and liabilities, nature of business activities and inter-connectedness within the group. |
4 For avoidance of doubt, the Framework does not apply to branches of a bank licensed in another jurisdiction operating in Saudi Arabia (“foreign bank branches”). Foreign bank branches are to comply with their home regulator’s prudential requirements.
5 The minority interests (capital held by third parties) that arise can only be recognized in consolidated capital only if they meet the applicable definition of capital in SAMA's Final Guidance Document Concerning Implementation of Capital Reforms. Any minority interest in excess of the subsidiaries’ minimum regulatory capital requirements is not recognized.
6 For example subsidiaries acquired through debt previously contracted and held on a temporary basis, or subject to different laws and regulation that conflict with SAMA regulatory requirements.
7 The application will be restricted to financial subsidiaries that can follows SAMA regulatory requirements