How SAMA Guidelines Affect SICR Assessments in Saudi Banks

Saudi Arabia’s financial system is changing quickly under Vision 2030. To make banks stronger and safer, the Saudi Central Bank (SAMA) gives rules that all banks must follow. One important rule is about how banks check for a Significant Increase in Credit Risk (SICR). This is part of the IFRS 9 standard.

What is SICR?

SICR means a borrower’s chance of not paying back a loan has grown higher compared to when the bank first gave the loan. If risk increases a lot, the loan moves from a safe category to a higher-risk category. This step is very important because it affects:

• How much money banks must set aside as a provision.
  
• How they manage Expected Credit Loss (ECL).
  
• The overall health of the banking system.
  

SAMA’s Role in SICR

SAMA wants banks in Saudi Arabia to be strong, fair, and clear. For this reason, it gives detailed guidelines on how banks should check SICR. These rules are made to:

• Keep banks from taking too much risk.
  
• Protect customers and investors.
  
• Make sure Saudi banks follow international best practices.
  

Key SAMA Guidelines for SICR

Here are some ways SAMA’s rules affect SICR assessments:

1. Early Warning Signals
   
   • Banks must watch loans closely from the start.
     
   • If a borrower delays payment or shows financial stress, banks must flag it early.
     
2. Clear Criteria
   
   • Banks cannot decide SICR on guesswork.
     
   • SAMA asks them to use set indicators like payment delays (30 days+), changes in credit score, or industry risks.
     
3. Consistency Across Banks
   
   • All banks must follow the same basic rules.
     
   • This helps SAMA compare risks across the whole system.
     
4. Forward-Looking Approach
   
   • SICR is not just about the past.
     
   • Banks must also check the future outlook of borrowers, like job stability, market conditions, or oil prices.
     
5. Regular Reviews
   
   • Banks must keep updating SICR assessments.
     
   • This makes sure risks are not hidden or delayed.
     

Why This Matters for Saudi Arabia

By making banks follow these rules, SAMA ensures:

• Stronger banks that can handle shocks.
  
• Better trust from investors and global partners.
  
• Support for Vision 2030, where financial stability is key for growth.
  

Final Thoughts

SICR assessments are more than a technical rule. They help protect the entire financial system. With SAMA’s strict guidelines, Saudi banks are more careful, transparent, and ready for the future.

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