Argaam Weekend | Saudi Banking Sector CAR: Basel III Requirements vs. Practical Performance

Week #76 > Saudi Banking Sector CAR: Basel III Requirements vs. Practical Performance

Saudi Banking Sector CAR: Basel III Requirements vs. Practical Performance

✍️By Yassir Nazih

Executive Summary

Saudi Arabia’s banking sector continued to demonstrate strong capitalization by the end of Q3 2025, with average total capital adequacy reaching 20.04%, well above the 8% minimum regulatory threshold under Basel III.

These levels were supported by robust operating profitability, solid asset quality, and low non-performing loans, in addition to the Saudi Central Bank’s (SAMA) conservative supervisory framework.

The indicators collectively confirm the sector’s ability to absorb risks and sustain credit expansion while maintaining comfortable liquidity and solvency buffers.

Results Highlights:

◆  All Saudi banks exceed Basel III capital requirements with comfortable buffers.
◆  Retained earnings rose 20% YoY, supporting Tier 1 capital.
◆  Liquidity remains strong, with LCR ratios ranging between 120% and 260%, averaging 160%.
◆  Asset quality improved, with NPL ratios between 0.76% and 1.4%, depending on the bank.

These indicators underscore the Saudi banking sector’s position as one of the strongest in the region—supported by a solid capital base, sustainable profitability, and an advanced supervisory framework that reinforces the Kingdom’s financial stability.

CAR Importance in the Banking System

Capital adequacy is a cornerstone of financial system stability. It measures banks’ ability to absorb unexpected losses and maintain business continuity without putting depositors’ funds at risk.

In an environment of accelerating economic change and global uncertainty, these indicators are increasingly important, particularly in emerging markets.

Basel III Framework: Global Standards

The Basel III framework emerged as a key regulatory reform following the 2008 global financial crisis. It aims to strengthen banking-sector resilience by increasing the level and quality of capital, limiting leverage, and improving liquidity.

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