SAMA Seeks Public Feedback on Finance Company Draft Principles

The Saudi Central Bank (SAMA) announced on May 26, 2024, that it is seeking public consultation on the drafts of new “Internal Audit Principles” and “Compliance Principles” for finance companies operating in the Kingdom. The initiative, released via the Saudi Press Agency (SPA), invites stakeholders and the public to review and provide feedback on the proposed regulatory frameworks through the government’s Public Consultation Platform, known as “Istitlaa.” This move underscores SAMA’s commitment to enhancing transparency, regulatory oversight, and the overall soundness of the financial sector in line with international best practices and Saudi Vision 2030.

Context and Background

SAMA, as the central bank and primary regulator of Saudi Arabia’s financial institutions, periodically reviews and updates its regulatory frameworks to keep pace with global standards and market developments. The consultation process is a key part of this effort, allowing for input from a wide range of stakeholders, including finance companies, industry experts, and the public. The “Istitlaa” platform, launched in collaboration with the National Competitiveness Center, serves as a centralized hub for such public consultations, promoting transparency and inclusive policymaking. This approach aligns with Vision 2030’s goal of a diversified and robust economy supported by a resilient financial sector.

Key Details

The draft “Internal Audit Principles” and “Compliance Principles” are designed to establish a comprehensive regulatory framework that clearly defines the roles of a finance company’s primary functions and delineates the responsibilities of the board of directors and executive management. Developed in accordance with best international practices, these principles aim to strengthen internal controls, risk management, and compliance within finance companies. Interested parties have 30 days from the announcement to submit their suggestions and observations via the Istitlaa platform. The drafts are available for review on the platform, which is managed in partnership with the National Competitiveness Center. This consultation reflects SAMA’s proactive and collaborative approach to regulation.

Implications and Impact

The introduction of these principles is expected to enhance the governance and operational efficiency of finance companies in Saudi Arabia, thereby boosting investor confidence and financial stability. By aligning with international standards, SAMA aims to foster a more transparent and accountable financial environment, which is attractive to both domestic and foreign investors. This initiative also supports the growth of the finance sector, a vital component of the non-oil economy. Furthermore, it demonstrates Saudi Arabia’s ongoing efforts to harmonize its regulatory framework with global norms, facilitating greater integration with international financial markets.

Vision 2030 Alignment

This regulatory update is directly aligned with Saudi Vision 2030’s objective of creating a thriving and sustainable financial sector. By promoting good governance and compliance, SAMA contributes to the development of a diversified economy, encourages investment, and supports the Kingdom’s ambition to become a global financial hub. The consultation process itself embodies the Vision’s principles of transparency, participation, and efficiency, ensuring that regulations are well-informed and broadly supported. As Saudi Arabia continues its journey of transformation, such initiatives reinforce the country’s commitment to excellence and leadership in the financial world.

20 Questions

Q1. What did SAMA announce on May 26, 2024?

A1. SAMA announced a public consultation on the drafts of “Internal Audit Principles” and “Compliance Principles” for finance companies, inviting feedback through the Istitlaa platform.

Q2. What is the purpose of these principles?

A2. They provide a comprehensive regulatory framework to define roles of primary functions and clarify responsibilities of the board and executive management, aligning with international best practices.

Q3. How can the public participate in the consultation?

A3. Stakeholders and the public can submit suggestions and observations via the Public Consultation Platform “Istitlaa,” within 30 days of the announcement.

Q4. What is the Istitlaa platform?

A4. Istitlaa is a government public consultation platform, managed with the National Competitiveness Center, where draft regulations are posted for public review and feedback.

Q5. Who is affected by these principles?

A5. Finance companies operating in Saudi Arabia, including their boards of directors, executive management, and internal audit and compliance functions, will be impacted.

Q6. Why is SAMA seeking public consultation?

A6. To gather input from stakeholders to ensure the draft principles are relevant, effective, and aligned with market needs and international standards.

Q7. How long is the consultation period?

A7. The consultation period is 30 days from the date of the announcement, during which feedback can be submitted.

Q8. What are the benefits of these principles for finance companies?

A8. They enhance governance, risk management, and compliance, leading to improved operational efficiency and greater investor confidence in the sector.

Q9. How do these principles align with international practices?

A9. They are developed in accordance with best international practices, ensuring that Saudi finance companies meet global regulatory standards.

Q10. What role does the National Competitiveness Center play?

A10. The center collaborates with SAMA to host the drafts on the Istitlaa platform, facilitating public access and participation in the regulatory process.

Q11. Will these principles apply to all financial institutions?

A11. They specifically target finance companies regulated by SAMA, not necessarily all financial institutions such as banks, which may have separate regulations.

Q12. How will the feedback be used?

A12. SAMA will assess the relevance of the feedback to finalize the draft principles before issuing them as final regulations.

Q13. What is the expected timeline for finalizing the principles?

A13. After the 30-day consultation, SAMA will review feedback and finalize the principles, though an exact timeline for implementation is not specified.

Q14. How does this initiative support Vision 2030?

A14. It promotes a robust financial sector, enhances transparency, and supports economic diversification and investment, key goals of Vision 2030.

Q15. What are the key responsibilities of the board under these principles?

A15. The board is responsible for overseeing the implementation of effective internal audit and compliance frameworks, ensuring accountability and sound governance.

Q16. How will these principles affect internal audit functions?

A16. They will formalize the role and independence of internal audit, ensuring it effectively evaluates and improves risk management and control processes.

Q17. What is the significance of compliance principles?

A17. Compliance principles ensure that finance companies adhere to laws and regulations, mitigating risks and promoting ethical conduct and market integrity.

Q18. Can individuals without financial expertise provide feedback?

A18. Yes, the consultation is open to the public, and all relevant feedback is welcome to ensure a comprehensive review of the drafts.

Q19. How does this consultation reflect SAMA’s regulatory approach?

A19. It demonstrates SAMA’s commitment to inclusive, transparent, and proactive regulation, involving stakeholders in shaping the financial landscape.

Q20. What happens after the consultation period ends?

A20. SAMA will analyze the feedback, finalize the principles, and issue them, after which finance companies will be expected to comply with the new regulations.

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