Regulatory Alerts2020-01-01
Decision of the Board of Directors No. 158 of 2020 dated September 30, 2020 regarding the Financial Adequacy Standards for Licensed Companies Engaged in Real Estate Financing Activities, as last amended on June 12, 2024
The General Regulatory Authority's Board of Directors issued Decision No. 158 (2020, amended through 2024) establishing mandatory financial adequacy standards for licensed real estate financing companies. The decision requires compliance with capital adequacy, leverage, liquidity, and asset-liability balance ratios, alongside operational risk management and specific provisioning for doubtful financing. It further mandates accurate risk-weighted asset calculations, standardized disclosure protocols, and the submission of periodic regulatory reports.
Decision of the Board of Directors No. (158) of 2020 dated September 30, 2020 Regarding the Financial Adequacy Standards for Licensed Companies Engaged in Real Estate Financing Activities As per the latest amendment dated June 12, 2024
General Regulatory Authority Board of Directors has decided:
(Article 1) (Article 2)
-1 The decision was amended by Board of Directors decisions No. 41 dated March 8, 2022; decision No. 161 dated November 16, 2022; and decision No. 110 dated June 12, 2024.
(Article 3) (Article 4) (Article 5)
Financial Adequacy Standards for Licensed Companies Engaged in Real Estate Financing Activities Objective of Applying the Financial Adequacy Standards
Article (1) 2 Capital Adequacy Standard: + First, the Capital Base Rule:
(The capital adequacy standard aims to measure the company's ability to face risks associated with its activities, primarily credit and operational risks.) 3 Note: The phrase "at all times" was added to Article 1 of the Standards by Board Decision No. (161) dated November 16, 2022.
: Second, Risk-Weighted Assets (Denominator of the Standard): Balance Sheet Items with Risk Weights
: Risks Third, Operational Risk: (4) 6 Article (2) Concentration Risks Article (3) Leverage Ratio
Operational risk refers to potential risks arising from the failure or inadequacy of internal procedures, human resources, and systems within companies, or due to external events, including legal risks. Gross profit is the total activity revenues (collected installments, i.e., other income or fees) minus direct activity costs and financing costs (i.e., other direct costs). 6 Note: The text of Article (2) was replaced by Board Decision No. 41 dated March 8, 2022.
Article (4) Asset-Liability Balance 7 Article (5) Liquidity Standard Article (6) Provision/Impairment Account for Doubtful Financing and Debt Write-off
7 Note: Article 5, Liquidity Standard, was replaced by Board Decision No. 110 dated June 12, 2024. Delinquency Level | Classification | Provision Ratio | Notes
Deferred Income Debt Write-off Article (7) Disclosure Standards
Article (8) Periodic Reports