Abdulrahman A Al-Hamidy: Risk strategies for Basel III compliance and beyond – extracting business value from regulatory change Speech by His Excellency Dr Abdulrahman A Al-Hamidy, Vice Governor of the Saudi Arabian Monetary Agency (SAMA), at The Institute of Banking/Moody’s Analytics Symposium, Riyadh, 30 November 2011. *  *  *  Distinguished Participants, I am pleased to be here today to share my thoughts on “Risk Strategies for Basel III Compliance and Beyond”. Given the lingering global financial crisis with ongoing impact on a number of economies and financial markets, this is a relevant and timely subject to deliberate upon. I appreciate the efforts of the Institute of Banking and the Moody’s Analytics to organize this Symposium for the benefit of the bankers and supervisors in the Kingdom. I have seen the list of topics to be covered today and the impressive list of speakers and I am confident that all of you would greatly benefit from the discussions. The world today has not yet recovered from the global financial crisis that started in 2007. While the governments, central banks, supervisory authorities and international organizations have been working hard to revive and revitalize financial markets and financial institutions in many advanced markets, the recovery has been slow. Following the financial crisis the lessons learned exercise had attributed the main causes to include a long period of easy monetary policy that fueled accelerated economic growth accompanied by lax and light supervision in a number of advanced markets.

Review and updating of SAMA regulatory requirements in other related areas. SAMA’s regulatory initiatives are aimed at protecting the interest of depositors and consumers of banks, besides ensuring the safety and soundness of banks. In conclusion, I would say that in the aftermath of the global financial crisis, the financial landscape has changed substantially and still continues to change at a rapid pace. In order to cope with the challenges ahead, the supervisors and central banks are required to have better management of systemic risks through coordination and cooperation in global standards and policies. We believe that Basel III when fully implemented will contribute significantly in managing the systemic risks and strengthening of global financial system. However, this will require substantial investment in systems and human resources as well as strengthening of governance and risk management frameworks. But this does not mean that we should excessively rely on advanced risk methodologies and models, and undermine the role of sound professional judgment and common sense. In practice, the use of quantitative risk models have proved much more effective when coupled with judgment and institutive thinking. We have been emphasizing upon our banks the value of strengthening risk management frameworks and methodologies along with requiring their boards to institute a strong corporate governance culture to manage the banks effectively. We at SAMA are also actively monitoring the new developments both globally and in domestic markets, and are fully geared to ensure stability of our financial system. I wish you a fruitful symposium! 4  BIS central bankers’ speeches