Banks Investment Rules

Banks’ Investment Policy should include, but not limited to, the following: ■ Governance requirements including setting controls, responsibilities, and delegation of authority. ■ Investment eligibility criteria. ■ Prudential exposure limits taking into consideration minimum capital, liquidity and reserve requirements set by SAMA. ■ Terms regulating the bank’s local and international investments by setting investment limits in-line with the bank’s core business activity, strategy, risk tolerance, risk profile, market and macroeconomic conditions which include but not limited to setting the following limits: - International investments (Local/foreign currency) to total investments - International investments (Local/foreign currency) to total regulatory capital (Tier 1 + Tier2) - Total investments / Total Assets ■ Guidelines to handle active/passive breaches to an investment limit or any fraudulent activity. ■ Criteria on eligible counterparties for dealing/trading as well as the proper counterparty limits. ■ Guidelines that include valuation of the portfolio, waterfall-pricing system and consistent portfolio calculation performance and reporting systems. ■ Systems for management of various risks and internal controls. ■ Data keeping requirements. 6.5 Banks should develop a clear, robust and demonstrable set of procedures, monitoring tools, governance and contingency plans to enable them to proactively identify any potential difficulties and risks, investigate the drivers and act in a timely manner to mitigate potential investment losses and report to the bank’s senior management and SAMA if needed. 6.6 Banks Investment Policy and procedures should be reviewed at least every three years or more frequently if the bank deems it necessary based on the changes in the relevant regulatory requirements or business practices. 6.7 Banks Investment Policy and procedures should adhere to the investment requirements in the Banking Control Law and all relevant regulations. 6.8 Banks should have a strategy for their investments that articulates in a clear and concise manner the bank’s approach and objectives, including establishing quantitative investment targets /goals and how to achieve them over a realistic timeframe. 6.9 Banks Investment Strategy should take into consideration the credit risk (Sectoral, Geographical, Settlement, etc.), market risk (volatility, interest rate including Interest Rate Risk in the Banking Book (IRRBB), FX, etc.), Operational risk (errors, frauds), liquidity risks, concentration risk and any other applicable risks. 6.10 Banks should oversee the implementation of the Investment Strategy and ensure that it remains appropriate in relation to the bank’s size, complexity, geographical footprint, business strategy, markets and regulatory requirements. 6.11 Banks should have an operational guidelines detailing how the investment strategy will be implemented. This should include clearly defining and documenting the roles, responsibilities, formal reporting lines and individual (or team) goals and incentives geared towards reaching the targets in the Investment Strategy. 6.12 Banks should put in place mechanisms to monitor the operational guidelines effectiveness and its integration into the bank’s risk management framework. 7. Risk Management and Monitoring 7.1 Banks should analyze and assess current and prospective investments, taking into consideration all risks that may arise from such investment. The results and any risks identified in the assessment should be reported to the relevant committee responsible for the bank’s investment activities. 7.2 Banks investments should be in-line with their risk management framework. Banks should have an adequate risk management system to identify, measure, and manage the risks generated from investment activities. 7.3 Before engaging in any investments, Banks should comply with all relevant Anti Money Laundering and Terrorism Financing requirements issued by SAMA.