As part of CMA’s continuous efforts to stabilize the Saudi financial market and protect investors, the results of the capital adequacy measures and quantitative assessments for the sector of securities business companies, have demonstrated that the authorized companies by CMA are ready to apply Basel III standards in the longer term to achieve greater financial stability.
These assessment results showed that the industry's capital adequacy ratio as the end of 2011 amounted to approximately 35 percent, exceeding the requirements of Basel III standards, the most important of which - as is well known – a capital adequacy ratio of up to 13percent.
Dr. Abdulrahman Al Tuwaijri, chairman of the Capital Market Authority, explained that the result confirms the financial strength of the securities business companies authorized by CMA and its compliance to the standards of Basel III. He added that CMA has supervisory and monitoring programs to ensure the financial soundness of the financial position of the authorized companies. This platform provides a stable and appropriate environment for investments and the protection of investors.
To ensure the commitment and compliance of the licensed authorized person, CMA adequately reviews the financial positions and prudential reports of each company on a monthly basis to make sure they have the requisite capital adequacy and net capital to cover its financial obligations if needed. CMA would allow the use of subordinated loans to strengthen their capital adequacy and to support its activities.
Dr. Al Tuwaijri explained that the Authority is currently finalizing the new Prudential Regulations. It takes into account the best practices and international standards in this field and incorporate the requirements of Basel II and Basel III. He pointed out that the CMA's Authorised Persons Regulations prescribed the principles pertaining to the fundamental obligations of the authorized security companies. Article 5 of these regulations provides 11 principles of which the authorized security company must comply with. One of these principles relates to financial prudence, by maintaining adequate financial resources in accordance with the Rules issued by the Authority.
