Loans to Deposits Ratio Guidelines

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Saudi Central Bank (SAMA) Loans to Deposits Ratio Guidelines 1\1arch 2023 G�...;.1��1 Saudi Cent S...\t-ral Bank

Contents I. Introduction ......................................................................................................................................... 2 2. ln1plc1nentation Tin1cline ................................................................................................................... 2 3. Reporting Requirements ..................................................................................................................... 2 -4. General Requiren1ents ........................................................................................................................ 2 5. Weighted Denominator Calculation .................................................................................................. 3 Loans to Deposits Ratio Guidelines Version 2.0 Issuance Date March 2023 Page Number 1 of 4

Loans to Deposits Ratio Guideline

1. Introduction In line with AMA 's continuous efforts to maintain the quality and soundness of banks' regulatory ratios and to support banks in managing their liquidity, AMA has reviewed the existing Loans to Deposits Ratio (LOR) guidelines to comprehensively capture banks' funding base. These guidelines are issued by AMA in exercise of the authority vested in SAMA under the Central Bank Law issued via Royal Decree o. M/36 dated 11 /04/ 1442H, and the Banking Control Law issued O 1/0 l/l 386H. These guidelines supersede the Loans to Deposits Ratio Guidelines circular No B.C.S 392 dated O 1 /07/1427H and subsequent guidelines for calculating Loans to Deposits Ratio (LOR) issued via SAMA circular No 39 l 00007 2844 dated 25/06/l 439H
2. Implementation Timeline These guidelines will be effective as of J S ' of June 2023.
3. Reporting Requirements Banks are required to report the Loan to Deposit ratio (LOR) to SAMA on consolidated basis using the updated LOR returns on monthly basis. The ratio should include local and foreign currency transactions of resident and non￾resident entities of the bank.
4. General Requirement 4.1 The Loans to Deposits Ratio is defined as net loans divided by deposits after applying weights: Loans to Deposits Ratio Guidelines Net loans LOR Weighted Deposits Version 2.0 Issuance Date March 2023 Page Number 2 of 4

4.2 Net Loan (The numerator) for the purpose of these guidelines, includes Loans and advances after deducting the following • Provisions for loan losses; • Unearned commissions income; • ommission in suspense. 4.3 Deposits (The denominator) for the purpose of these guidelines, includes the following components: a. Deposits and Repos. b. Long Term Debts: • Sukuks/ Bonds; • Syndicated debts; • Subordinated debts; • Other Debts (any other long term debts not classified above). 4.4 For avoidance of doubt, interbank transactions and transactions with SAMA should not be included in the LDR calculation, unless specifically stated by SAMA. 4.5 SAMA expects banks to maintain total LDR below 90%, Subject to numerator not exceeding unweighted denominator. 5. Weighted Denominator Calculation 5.1 Banks will apply the weights below to the denominator components (as applicable) in order to compute the weighted amount: � - 1-3 M 4-6 M Demand/ Less than 3-4 M 6-8 M 8 M -I' Over I' Over2 ' IM (31-90 (91-120 (121-180 (181-240 (241-365 over night (1-30 D) D) D) 0) 0) 0) to 2 Y to 5 Y 100°0 105° 0 110° 0 I 15° 0 120° 0 130° 0 140°0 I 150° 0 170% 5.2 Original maturities should be used for new transactions while outstanding transactions should be based on residual maturities. Loans to Deposits Ratio Guidelines Version 2.0 Issuance Date March 2023 Page Number 3 of 4 Over 5 ' 190%

5.3 For callable sukuks/bonds, residual maturity is calculated based on the first callable date of the sukuks/bonds to determine the applicable weight in the table (I). 5.4 For perpetual sukuks/bonds, banks should apply 190% weights unless the sukuks/bonds have a callable date then the sukuks/bonds weight will be applied based on the sukuks/bonds callable date. Loans to Deposits Ratio Guidelines Version 2.0 Issuance Date March 2023 Page Number 4 of 4