SAMA chief: Saudi banks ready for Basel III, doubtful loans

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Saudi Arabian lenders currently meet Basel III requirements and have doubtful loans covered, according to the head of the kingdom’s central bank.

“Banks [in Saudi] are meeting the current Basel III requirements,” Fahad al-Mubarak, governor of the Saudi Arabian Monetary Agency (SAMA), told Al Arabiya during an exclusive interview.

“They have previously also met Basel II requirements since 2005, which shows the ability of SAMA to supervise banks and maintain powerful balance sheets,” he added.

Basel III is a regulatory framework for banks released by the Basel Committee on Banking and Supervision. It covers aspects such as minimum capital requirements and banks’ liquidity coverage ratio. It is being implemented in phases between 2013 and 2019.

SAMA is not worried about doubtful loans held by Saudi banks, al-Mubarak said.

“Our policy states to always support these provisions. Doubtful loans make up less than 1.5 percent of the total loans, and the doubtful loans are 150 percent covered. So we stand in the safe zone in terms of volume and coverage of doubtful loans,” said the governor.

In the future, banks’ profitability will be linked to their provisions. As banks grow their profitability, they will be required to allocate larger amounts for such provisions, added the official.

Al-Mubarak also stated that SAMA received over 13 license applications from companies and banks to provide mortgage and finance services. He added that licenses could be issued to some of the applicants over the coming months.

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