Banking Control è Guidelines and Procedure

RULES FOR ENFORCING PROVISION

OF THE BANKING CONTROL LAW

Ministerial Decision

No.3/2149 dated 14.10.1406 H

Ministerial Decision

No.3/2149 dated 14.10.1406 H.

The Minister of Finance and National Economy,

In accordance with the powers entrusted to him,

In compliance with Article 26 of The Banking Control Law issued

under Royal decree No.M/5 dated 22.2.1386(11.6.1966),

Having reviewed the Memo of His Excellency the Governor of the Saudi Arabian Monetary Agency (SAMA) No. 4111MZIMA dated 13.6.1406H, proposing draft rules for enforcing the provisions of "The Banking Control Law",

Having reviewed Ministerial Decision No.31920 dated 16.2.1402 H, concerning "Regulations for Money Changing Business", and

Having reviewed Ministerial Decision No.31959 dated 26.4.1404 H, setting rules for the formation of the committee prescribed under Article 25 of "The Banking Control Law" to adjudge contraventions punishable under said Law,

Decides the following:

1. Approval of the rules for enforcing the provisions of "The Banking Control Law" as per the following procedure:

Firstly:

In implementation of Article 16 of "The Banking Control Law", banks shall comply with the following:

1. Non-contravention of the rules set forth by SAMA concerning the limits on loans and credit, which a bank may extend.

2. Non-contravention of the rules prescribed by SAMA concerning the extension of certain types of loans and other transactions, such as, but not necessarily exclusive of:

a. Notifying SAMA, prior to undertaking or commitment, of any loan application submitted by a non-resident entity.

b. Obtaining prior written approval of SAMA before initiating any procedure for extending any loan to a non-resident entity.

c. Obtaining the prior written approval of SAMA before inviting foreign banks to participate in any syndicated loan facilities in Saudi Riyals.

d. Obtaining the prior written approval of SAMA before participation in any syndicated loan facilities in Saudi Riyals arranged outside the Kingdom for both resident and non-resident entities.

e. Obtaining the prior written approval of SAMA before participating in any syndicated loan facilities arranged in foreign currencies for non-residents.

f. Obtaining the prior written approval of SAMA before the acquisition of, or subscription for, any securities in Saudi Riyal abroad.

g. Obtaining the prior written approval of SAMA before the acquisition of, or subscription for, any securities in foreign currencies abroad, with the exception of bank ownership of treasury bills and negotiable certificates of deposits.

h. Obtaining the prior written approval of SAMA before issuing and/or participation in the issue of any securities inside or outside the Kingdom.

i. Reporting to SAMA before introducing any new activities inside the Kingdom, which may entail financial obligations on the Bank.

3. Non-contravention of any of the guidelines and rules set forth by SAMA for banks for carrying on certain types of transactions for their customers such as, but not necessarily exclusive of:

a. Adherence to the tariff schedule for banking services. :

b. Informing government authorities of foreign guarantees issued by banks other than those included in the approved list which was supplied to the banks; and of breaches of any of the terms that should be complied with in such guarantees, in keeping with Circular No.II/M112407 dated 5.8.1396 H of the Ministry of Finance and National Economy and any circulars that might be issued thereafter.

c. Refraining from conducting, or mediation in conducting any transaction, which might involve circumvention of the provisions of "The Banking Control Law" inside and outside the Kingdom.

d. Refraining from implementing any scheme for soliciting deposits, with the exception of current accounts and fixed-term deposits, before reporting to SAMA.

e. Refraining from carrying on any banking business with any person who is not licensed to conduct such business in accordance with the regulations in force, including money changers who are not licensed by SAMA in conformity with the Decision No.31920 dated 16.2.1402 H of the Minister of Finance and National Economy.

4. Non-contravention of rules issued by SAMA concerning cash margins, which should be maintained against certain types of letters of credit or guarantees.

5. Non-contravention of instructions on the minimum limit of collateral between the amount of loan and assets offered to secure it, which should be observed by banks as, prescribed by SAMA.

6. Non-contravention of instructions issued by SAMA on earmarking assets to be maintained by each bank within the Kingdom and their ratio to deposits liabilities.

7. Non-contravention of instructions issued by SAMA concerning bank holidays and bank business hours.

8. Non-breach of provisions of The Banking Control Law and related executive rules which prohibit banks from helping or covering up others in carrying on banking or commercial business which they are not allowed to undertake, or circumvent the terms and rules of the Banking Control Law. It is also forbidden for any bank employee to request or obtain a reward for extending, or recommending the extension of credit facilities from the bank.

Secondly:

In pursuance of the provisions of Article 12 of The Banking Control Law, every bank is to observe the following:

1. No person shall be appointed a member of the Board of Directors of more than one bank. Any person who is nominated as a member of the Board of Directors of any bank shall disclose his membership in the Board of any other bank.

2. None of the following actions or practices shall be performed without prior written approval of SAMA:

a. Election of any person as a member of the Board of Directors of any bank if he had occupied a similar position in a banking concern which was liquidated, or if he had been previously removed from a similar post in any banking establishment, even if the liquidation had been made before coming into force of the " Banking Control Law" whether the banking concern was located inside or outside the Kingdom. Any person who is nominated as a member of the Board of Directors shall disclose such information.

b. Appointment of any person as a manager of a bank if he had occupied a similar position in any banking concern that was liquidated, or if had been previously removed from a similar position in any banking concern even if the liquidation or removal had occurred before coming into force of the Banking Control Law whether this banking concern was located inside or outside the Kingdom. Every person nominated, or applying for this position shall disclose such information.

3. Submission of all particulars and information requested by SAMA about persons occupying or nominated to occupy leading positions in the bank. Thirdly: In accordance with Article 17 of the "Banking Control Law", every bank shall observe the following:

1. Submission of the following information to SAMA in the manner it will prescribe and in accordance with instructions it will issue.

A. Monthly Statements

(A.1) A Statement of Conditions.

(A.2) Banks having branches and banking units abroad shall also submit:

-A consolidated Statement of Conditions of the bank, including its branches and units inside and outside the Kingdom.

-A separate Statement of Conditions of each branch or unit abroad.

(A.3) A statement of foreign assets and liabilities.

(A.4) A statement of banks' purchases and sales of foreign exchange.

(A.5) A statement of imports financing statistics.

B. Quarterly Statements

(B.l) Profit and loss Account Statement.

(B.2) Banks having branches and banking units abroad shall also submit a Profit and Loss Account statement for each branch or unit separately.

(B.3) A statement of deposits of government departments and agencies.

(B.4) A statement of geographic breakdown of foreign assets.

(B.5) Quarterly balance sheet statements of the bank and its operating activities that should be published in daily newspapers four times during the financial year, (as per the rules regulating share trading transactions, before their publication).

C. Bi-annual Statements

(C.l ) A statement of Classification of bank credit by economic sectors.

(C.2) A statement of maturity analysis.

(C.3) A statement of Loans and advances granted to non-residents and foreign investments.

(C.4) A statement of doubtful loans and advances.

D. Annual Statements

(D.l) Bank's annual balance sheet and closing statements.

(D.2) Bank's detailed auditors' report on the bank's balance sheet.

(D.3) Annual report of the bank's board of Directors. Banks with branches and banking units abroad shall submit separate Balance sheet for each branch or unit, along with the detailed auditors’ report.

E. Any statements related to the bank's branches and units abroad in accordance with instructions issued by SAMA in this respect.

F. A copy of the minutes report of every General Meeting of the Shareholders, or the meeting of the partners, within one month from the date on which the meeting was held.

2. Requesting banks' external auditors to directly submit to SAMA any data, explanations or information requested by it on the banks' activities within the scope of their business.

Fourthly:

In pursuance of the provisions of Article 18 of the "Banking Control Law" the banks shall be fully committed to cooperate with the inspection team designated by SAMA for inspecting the bank activities. To this end, none of the bank's staff shall exercise any of the following acts or practices:

a. Obstructing the team from examining the bank's books, accounts and other documents, which the team desires to have access to for the perfom1ance of its duty.

b. Refraining from producing available infom1ation and explanations requested by the team, or its deliberate concealment.

c. Withholding from the team on the commencement of its inspection breaches in the bank's activities, or concealing same deliberately.

d. Non-compliance with the recommendations and instructions issued by the team to the bank as a result of its inspection.

Fifthly:

In implementation of Article 22 of the "Banking Control Law", if SAMA finds that a bank has failed to comply with the provisions of the Banking Control Law or its executive rules, or if a bank adopts a policy that might seriously affect its solvency or liquidity, it may take one or more of the following measures:

1. Enforce the penalties prescribed under Article 23 of The Banking Control Law.

2. Suspension or removal of any of the bank's staff who deliberately produced incorrect data, or stated inaccurate information or events.

3. Drawing the attention of the bank to the contraventions in its business, and requesting it to rectify the situation within a time limit specified by SAMA, either in writing or through calling the bank's chairman of the Board or Directors or the chief executive officer or the general manager. If the bank fails to comply with SAMA's instructions, it may take some or all the measures indicated hereinafter against the bank.

4. Informing the chairman of the bank's Board of Directors through SAMA's representative or any other means of the necessity to invite the bank's Board of Directors to convene a meeting within a time period specified by SAMA to look into the bank's contraventions and to take necessary measures for their removal. This meeting will be attended by one or more representatives from SAMA.

5. The bank shall comply with any measures that SAMA deems necessary for the rectifying of the situation.

6. Appointment of one or more advisers by SAMA to advise the bank on the conduct of its business.

7. Appointment by SAMA of a member as an observer in the bank's Board or Directors for a time period specified by SAMA. The member shall be entitled to participate in the discussions held at the meetings of the Board and record his opinion with respect to the decisions taken by the Board during such meetings.

8. Taking any other measures that SAMA may deem necessary on the approval of the Minister of Finance and National economy.

2. This decision shall be notified to whom it may concern for implementation and it shall come in force from the date of its issue.

Minister of Finance and National Economy

Mohammad Abal Khail