SAMA: Controls for rapid intervention and treatment of default in important financial institutions

The Governor of the Central Bank of Saudi Arabia “SAMA”, Ahmed bin Abdul Karim Al-Khulaifi, said: The system for treating important financial institutions includes controls for handling, faltering, and the rapid intervention of regulatory agencies in times of crisis. Al-Khulaifi added, in a statement issued by the Central Bank, that the approval of the Council of Ministers on the system enables “SAMA” to effectively supervise and control important financial institutions, in order to ensure the maintenance of monetary and financial stability, and to protect the financial system from any negative influences, in line with the recommendations of the Group of Twenty. And the Financial Stability Board. He said: The Central Bank conducted a comprehensive study of the regulatory framework for treating important financial institutions early on, studying and analyzing the best practices and relevant international principles, and creating a regulatory framework consistent with the local environment and the national economy.

He indicated that the system for treating significant financial institutions is according to its name; Of an exceptional nature in terms of the applicability of its provisions to specific entities and cases, and its provision of special tools to ensure the achievement of its objectives. He pointed out that the system extends beyond its scope the financial institutions under the supervision of the Central Bank. Which is not classified as “important”, explaining that the system aims to enable the Central Bank to take action; To maintain the safety and stability of the financial sector, protect depositors ‘funds, clients’ assets, and insurance policy holders, in addition to ensuring the continuation of the necessary activities of financial institutions, in order to reduce dependence on government support. The system also includes special provisions that require the establishments covered by its provisions to prepare a “restoration” plan, which are those measures and steps that will be taken to restore their status in the event of failure or its possibility. The central indicated that it is preparing a “treatment plan” that includes the measures that will be taken when the facility is subjected to treatment – in accordance with the provisions of the system.

The system includes the necessity of approval by the Council of Economic and Development Affairs on the treatment plan before the concerned party starts implementing it, and the existence of a specialized system that addresses the situation of troubled “important” financial institutions or those that are likely to stumble; An imperative that emerged in the wake of the global financial crisis of 2008; This prompted the Group of Twenty (G20) to issue its recommendations to the Financial Stability Board to review and analyze the causes of the crisis. According to the central statement, the importance of developing laws that enable regulatory agencies to intervene quickly and effectively to avoid the occurrence of crises affecting the stability of the financial system.

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