Adjustable-Rate Real Estate Finance Products of Retail Consumers

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In the Name of Allah, the Most Gracious, the Most Merciful

Saudi Central Bank (SAMA) Headquarters

Office of the Governor No.: 391000000353 Date: 01/01/1439 AH Attachments: None

Circular

Subject: Adjustable-Rate Real Estate Finance Products for Retail Consumers

To: ....................................................... Respected,

Peace, mercy, and blessings of Allah be upon you,,,

The Saudi Central Bank (the "Bank") wishes to affirm the principles of protecting bank and financing company customers, which emphasize the necessity of fair and equitable treatment (Principle No. 1), disclosure and transparency (Principle No. 2), and financial education and awareness (Principle No. 3). It also reaffirms the obligations and responsibilities of the financier toward its customer, most notably verifying that the product aligns with the customer's needs and circumstances, explaining the nature of the product, its costs, benefits, and risks clearly and understandably to the customer. Additionally, it highlights the financier's role in providing advice and consultation to customers facing financial difficulties and working with them to overcome these challenges before proceeding with legal actions against them.

In light of the monthly installment increases experienced by some beneficiaries of adjustable-rate real estate finance products, and based on a study conducted in this regard, the Bank directs real estate financiers to immediately take all necessary measures to exercise due care toward their customers. These due care measures must include appointing specialists with sufficient knowledge of the characteristics of this product type to communicate with customers and provide a clear explanation of the product's nature, benefits, risks, related contract details and clauses, pricing adjustment mechanism, and answering any other customer inquiries regarding the matter. Furthermore, these measures must include offering the real estate financier one or more options to the customer, in addition to the option of continuing with the existing real estate finance contract. These options include converting the contract to a fixed-rate finance agreement, restructuring, and enabling the customer to transfer the debt to another real estate financier under terms suitable for the customer.

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In the Name of Allah, the Most Gracious, the Most Merciful

Saudi Central Bank (SAMA) Headquarters

Office of the Governor No.: ................................................... Date: ................................................... Attachments: ...................................................

The Bank emphasizes that none of these options should result in charging the customer a penalty fee for early repayment beyond the remaining period, in accordance with the provisions of early settlement stipulated in financing regulations and bylaws, without charging the customer any additional administrative fees.

The Bank clarifies that this directive stems from its commitment to protecting customer rights and striving for fairness and transparency in transactions, based on the authorities granted to it under Royal Decree No. (23) dated 23/5/1377 AH for the Banking Control System, Royal Decree No. (M/50) dated 13/8/1433 AH for the Real Estate Finance System, Royal Decree No. (M/48) dated 13/8/1433 AH for the Financial Leasing System, and Royal Decree No. (M/51) dated 13/8/1433 AH for the Financing Companies Control System, along with the executive regulations of these systems. The Bank will take regulatory actions in case of non-compliance with the aforementioned directives.

For information and implementation, the Bank shall be provided with a report containing a list of all affected retail customers during 2016 and 2017, along with the measures taken and the final resolution for each customer individually, within ten working days from the date of this circular.

Please accept my greetings and appreciation,,,

Ahmed bin Abdulrahman Al-Khalifi Governor

Distribution Scope:

• Banks operating in the Kingdom
• Financing companies

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P.O. Box: 2992 Riyadh: 11169 Email: governor@sama.gov.sa Tel: 463 3000 Fax: 463 3703