Update to the Guidelines on Standing Orders for Real Estate Financiers

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Saudi Central Bank

Ref. No.: 43033273 Date: 1443/04/13 (Hijri) Attachments: 5 pages

Circular

To Whom It May Concern,

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

Subject: Update to the Standing Order Guidelines for Real Estate Financiers.

With reference to the Standing Order Guidelines for Real Estate Financiers issued via Saudi Central Bank Circular No. (41039820) dated 1441/06/05H, which aim to facilitate diverse financing options for customers, mitigate default risks, and establish minimum compliance requirements when providing or utilizing this service.

Attached are the Standing Order Guidelines for Financing Entities, which supersede the aforementioned guidelines. Please note that the key changes are as follows:

1. The service now covers all financing products, not limited to real estate financing products.
2. The scope of financing entities now includes banks and funds affiliated with the National Development Fund.

For your information and action effective from the date hereof.

Yours sincerely,

Fahd bin Ibrahim Al-Shathri Deputy Governor for Supervision

Distribution Scope:

• Banks and commercial banks operating in the Kingdom.
• Financing companies operating in the Kingdom.

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Standing Order Guidelines for Financing Entities (Second Edition - Rabi' al-Awwal 1443H / November 2021)

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Table of Contents

First: Definitions and General Provisions ................................................................................................. 3 A. Definitions ........................................................................................................................... 3 B. Objective .............................................................................................................................. 3 C. Scope of Application ..................................................................................................................... 3 Second: Standing Order Guidelines for Financing Entities ........................................................................ 3 A. Obligations of Banks .................................................................................................................... 3 B. Obligations of the Beneficiary Financing Entity ............................................................................................ 4 Appendix ................................................................................................................................. 5

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First: Definitions and General Provisions

A. Definitions The following terms and expressions, wherever used in these Guidelines, carry the meanings specified opposite each of them, unless the context otherwise dictates: Financing Entity: Banks, commercial banks, and financing companies subject to the supervision of the Saudi Central Bank, as well as government financing entities such as banks and funds affiliated with the National Development Fund. Financing: Credit extended to the customer by a financing entity. Customer: A natural person who has obtained financing from a financing entity. Standing Order for Financing Entity: A banking service through which periodic financial transfers are executed from the customer’s account to the financing entity’s account over a specified period and amount to settle financing. Reliable Communication Channels: A registered, verifiable communication channel that can be retrieved in written or electronic form.

B. Objective These Guidelines aim to establish the minimum provisions to be complied with regarding standing orders for financing entities, enhance and protect competition among financing entities, support the availability of financing options for customers, and contribute to reducing default risks.

C. Scope of Application These Guidelines apply to all financing products, without prejudice to the principles of responsible individual financing, collection guidelines and procedures for individual customers, and other related regulations and instructions.

Second: Standing Order Guidelines for Financing Entities

A. Obligations of Banks Banks and commercial banks, when providing a standing order for a financing entity, shall comply with the following:

1. Verify that the customer has a fixed monthly income (salary or similar) before accepting an application to establish a standing order for a financing entity.
2. Obtain the customer’s acknowledgment of their awareness of the implications of establishing a standing order for a financing entity, according to the acknowledgment form detailed in the Appendix.
3. Notify the customer upon establishing a standing order for a financing entity via reliable communication channels, with the notification including at minimum: the transfer amount, the order execution start date, the duration in months, the account number to which funds are transferred monthly, and the name of the beneficiary financing entity.
4. Execute the standing order for a financing entity for the full transfer amount immediately upon the due date, or within (five) days from that date if funds are unavailable on the specified date.
5. Notify the customer if a standing order for a financing entity is not executed, explaining the reason via reliable communication channels.

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6. Obtain the consent of the beneficiary financing entity or secure a release letter from them when the customer requests to amend or cancel the standing order.
7. Verify that the target transfer amount in the customer’s account is not among the amounts confirmed by the Saudi Central Bank as protected or exempt from deduction, and also consider instructions related to attachment, execution, and restrictions on banking accounts when creating or executing standing orders.

B. Obligations of the Beneficiary Financing Entity The beneficiary financing entity of a standing order shall comply with the following:

1. Grant the customer approval to change the standing order amount when their circumstances change, resulting in debt rescheduling, within (three) business days from the date the financing entity completes rescheduling procedures.
2. Issue the customer a release and non-objection letter for cancelling the standing order within (seven) business days from the request date in the following cases: a. Settlement of due obligations. b. Exemption as specified in relevant Saudi Central Bank instructions, or as stipulated by related regulations and instructions, or as provided in contracts.
3. Beneficiary financing entities may coordinate and pre-arrange with each bank individually to receive instant notifications or periodic data reports detailing standing order transactions executed on their behalf.
4. Notify the customer upon receiving the standing order amount via reliable communication channels.

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Appendix I acknowledge that the standing order to settle my obligations from my banking account (IBAN No.: .........) arising from financing granted to me by a financing entity, and that I cannot cancel it except after submitting a release letter from the beneficiary financing entity of this order. I also acknowledge that I am not entitled to change the monthly deduction amount or duration except after obtaining consent from the beneficiary financing entity. Furthermore, I acknowledge that (the Bank) has the right to deduct the monthly deduction amount on its specified date or within (five) days from that date. I further acknowledge that (the Bank), as the executing entity for the standing order, is not liable for any damages arising from the standing order, does not bear any obligations resulting from its execution, and (the Bank) may recourse against me for any damages it incurs as a result of this order.