Saudi Arabia has been heavily investing in the Kingdom’s infrastructure, local talent, and entrepreneurs to position itself as a leading fintech hub since 2018, when the Saudi Central Bank, Saudi Arabia Monetary Authority (SAMA) and the Capital Market Authority (CMA) launched the Financial Sector Development Program (Fintech Saudi). The program, which includes banks, insurance companies, stock and debt markets, investors, and governments, fosters innovation for a strong, responsible, inclusive ecosystem, and long-term growth. It has strengthened financial institutions, advanced the market, encouraged savings, and spurred the growth of fintech startups. Today, Saudi Arabia’s Tadawul is among the top-10 largest capital markets globally, listed on the leading international indices such as MSCI, S&P Dow Jones, and FTSE Russell.
Saudi Arabia also actively encourages foreign fintechs and banks to invest and set up entities in the region. The Kingdom has worked to establish a robust regulatory framework and expectations in terms of digitalization and strict governance; it adheres to international standards, including the Bank for International Settlements (BIS) and the International Organization of Securities Commissions’ (IOSCO) requirements to ensure the overall stability for the financial services sector; and aligns its regulatory frameworks to adopt best practices for data preparation, validation, submission, collection, and analysis.
The fruition of this endeavour is within Vision 2030. And on the road to achieving the vision, SAMA has published 27 new regulatory reporting updates to banks that will significantly impact their reporting obligations, data granularity, and governance.
Following is a summary of recent granularity updates that went live in December.
New Reports: Aggregated reporting data level | |
New Reports: Granular reporting data level | |
Updated Reports: Minor update | |
Updated Reports: Greater granularity of reporting data | |
Removed Reports | |
Total |
Why is this reporting update important?
First, the timing. Saudi Arabia has worked hard to modernize its financial landscape and update laws and regulations to meet the highest international standards and keep up with global trends for innovation and private-sector growth, as well as its goal of being a premier fintech destination – Vision 2030. And just as the goal appears in sight, new regulatory reporting updates emerge, which will significantly impact banks’ reporting obligations with their subsequent complexities.
Second, the focus on increased granularity shows that regulatory authorities are looking for more details to help them monitor financial institutions. This trajectory also aligns with the strategy of regulators around the globe to request a level of granularity that facilitates generation of required metrics, given the submitted information. However, granularity demands greater attention to data quality, governance, and controls. In fact, it necessitates an integrated, end-to-end solution.
Third, the extensibility. Not only is Saudi Arabia looking to establish itself as a powerhouse on the environmental side of ESG principles, with a move away from fossil fuels, but it is also aligning its vision on the social side as it looks to encourage more female inclusion in the economy and a greater focus on the overall integration and pride of society. A single platform for regulatory reporting and ESG would be ideal.
What are the key drivers from a functional point of view?
- Increased reporting granularity demands greater attention to data quality, which could be affected by inconsistent report allocation, incorrect tagging, and missing information. This requirement also heavily impacts data sourcing, collection, management, aggregation, and risk calculations.
- Additional requirements as regulators advance more automated and sophisticated reporting methodologies that put new pressures on firms at the disclosure and reporting stages to conform functionally and technically; and at submission via a portal or even to enable direct data collection by the regulator.
- Greater need for governance, integrated solutions, and training. A lack of awareness and understanding of these factors and concepts increases the organization’s learning curve and hinders implementation.
What are the technical challenges created by this regulation?
Why are we best suited to solve this challenge?
Given the updated requirements and the investment already put into creating an international financial hub, it is almost guaranteed that Saudi institutions will need systems that provide robust regulatory reporting i.e., a solution that:
- Has an inbuilt governance framework from data capture, through calculations, to report submission.
- Provides a holistic user interface for the core reporting process including access to key outstanding metrics, audit-adjustment history, sign-off, and submission generation.
- Includes robust coverage across SAMA and CMA requirements.
- Utilizes a universal data interface that isolates the bank from future change, including new requirements.
- Delivers full transparency into and lineage of regulatory rules and reporting data.
All of this, while leaving the bank in control of the data journey and therefore the ability to attest to the correctness of the information presented to the regulator.
While this level of governance and control might not be mandatory for reporters now, the vision set out by the Kingdom makes these requirements inevitable. Preparation can cater for the now as well as alleviate the rush to comply in the future.
Increased reporting granularity requirements impact data quality, sourcing, collection, management, aggregation, and calculations and knock-on effect such as inconsistent report allocation, incorrect tagging, and missing information.
Additional regulatory requirements for more automated and sophisticated methodologies pressure firms at the disclosure, reporting/submission stages, leading to a greater need for governance, integrated solutions, and training.