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2004-01-19

Circular Re. Loan Classification, Provisioning and Credit Review

The Saudi Arabian Monetary Authority issued a circular mandating that Saudi banks implement a new loan classification, provisioning, and credit review system effective January 1, 2004. The regulation requires banks to maintain general provisions of 1% for Standard and Special Mention loans while enforcing automatic provisioning for non-performing loans based on days past due. Banks must submit quarterly reports on loan portfolios, provisions, and any exceptions to these rules by the 15th of the month following each quarter.

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&aubi �rabian ;fllonetarp §gtnq, RIYADH 11H59 • SAUDI ARABIA Deputy Governor

  • 2 - the adjustment could be made to a general reserve or to statutory reserve following approval by SAMA on a case by case basis.
  1. General Provisions will be 1 % of loans in the 'Standard' and 'Special Mention' categories. All Saudi Government loans or claims fully backed by collateral of Saudi Government in form of securities or guarantees should be deducted before calculating general provisions.
  2. SAMA has specified automatic provisioning requirements related to Banks' non-performing loan portfolios, based on the number of days past due. However, exceptions are permitted for individual loans where a bank has strong documentary evidence that a loan is performing despite being past due. It is expected that such exceptions will be used in limited number of cases. Saudi banks are required to maintain a list of such loans that have been treated under this exception and document the underlying reasons. SAMA requires all Saudi banks to provide the following information. These are to be provided by 15th of the month following the end of the quarter.
  3. A quarterly report on the loan portfolios according to the proposed classification system - Annex 1.
  4. A quarterly report on Loan Provisions -Annex 2.
  5. A quarterly list of loans where exceptions have been made to the general rule of automatic classification - Annex 3.
  6. Guidance Notes-Annex 4. These rules are to be implemented from 1 January 2004, with the first Quarterly Reports due as of 31 March 2004. Teleg. Address: "MARKAZI" - Telex: 401734-37 - Telephone: 4633000 - Fax.: 4633223
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