The initiative involves collecting and assessing default and recovery data from 12 local banks and is a key step in the process of strengthening risk management standards in the banking industry in the Kingdom of Saudi Arabia (KSA).
âThis is a very important alliance for Standard & Poorâs and our Risk Solutions business, and we are delighted to be working with SIMAH and its participating member banks on such a crucial project,â said Deven Sharma, President of Standard & Poorâs. âStandard & Poorâs is fully committed to supporting the ongoing development of banking and capital markets in the KSA, drawing on our wide range of data and analytical capabilities, and I look forward to extending this relationship to many other credit risk related activities in the coming years.â
âThere is a scarcity of data in some commercial lending asset classes in KSA and in many other countries, as historically defaults have been rare,â explained Bernard OâSullivan, Managing Director and Head of Standard & Poorâs Risk Solutions in Europe, Middle East & Africa. âThis has been a significant challenge to overcome for many banks. The data consortium initiative will address this by rapidly building a robust dataset reflecting the underlying factors that drive credit risk. We believe the initiative taken by SIMAH is a very positive example to others and will have attractive and far reaching benefits for the participating member banks and investors in the region.â
âSIMAH has been assigned by the banks to study the best possible options, revise them scientifically, submit them in the form of an integrated project and develop technical models that can be applied to all Saudi banks so as to measure risks,â said Nabil Abdullah Al-Mubarak, General Manager of SIMAH. âBased on that, SIMAH has conducted extensive studies to determine the requirements, know the banks' capabilities, analyze all other experiences in this regard and finally determine the entity that could carry out this project as a technical partner. Accordingly, SIMAH sent out all offers to the companies interested and we chose Standard & Poor's Risk Solutions.â
Under the initiative, the participating member banks will provide information on their mid-market and large corporate defaults, both historically and on an ongoing basis. This information will follow criteria established by Standard & Poorâs Risk Solutions and will be held on SIMAHâs secure confidential database in Riyadh. In addition, information on a significant sample of performing commercial loans will be assembled and will enable Standard & Poorâs Risk Solutions to develop a probability of default model for Saudi corporate debt, as well as provide industry-wide statistics on historic recovery and default trends in the Kingdom.