Circular Re. The Update of the Guidelines on Standing Orders for Real Estate Financiers

Saudi Central Bank

Ref: 43033273
Date: 1443/04/13
Attachments: 5 pages

Circular

Dear Sirs,

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

Subject: Update of the guidelines for standing orders in favor of financiers.

I refer to the guidelines for standing orders in favor of financiers communicated via Saudi Central Bank Circular No. (41039820) dated 1441/06/05H, which aimed to contribute to providing different financing options for customers and limiting default risks, and to set minimum guidelines that must be adhered to when providing or benefiting from this service.

Attached are the guidelines for standing orders in favor of financing entities that replace the aforementioned guidelines. Note that the main 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 belonging to the National Development Fund.

For your information and action from its date.

Accept my regards,

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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Guidelines for Standing Orders in Favor of Financing Entities (Second Issue - Rabi' al-Awwal 1443H / November 2021M)

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Index

First: Definitions and General Provisions ................................................................................................. 3
A. Definitions ........................................................................................................................... 3
B. Objective .............................................................................................................................. 3
C. Scope of Application ..................................................................................................................... 3
Second: Guidelines for Standing Orders in Favor of 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 words and phrases, wherever they appear in these guidelines, have the meanings indicated next to each, unless the context dictates otherwise:
Financing Entity: Commercial banks and financing companies subject to the supervision of the Saudi Central Bank, and government financing entities such as banks and funds belonging to the National Development Fund. Financing: Credit granted to the customer by the financing entity. Customer: A natural person who has obtained financing from a financing entity. Standing Order in Favor of Financing Entity: A service provided by banks through which financial transfers are executed periodically from the customer's account to the financing entity's account during a specific period and amount to repay the financing. Reliable Communication Means: A registered, verifiable, and retrievable communication method in written or electronic form.

B. Objective
These guidelines aim to set the minimum provisions that must be adhered to regarding standing orders in favor of 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, guidelines and procedures for collecting from individual customers, and other related systems and instructions.

Second: Guidelines for Standing Orders in Favor of Financing Entities

A. Obligations of Banks
Banks and commercial banks must adhere to the following when providing standing orders in favor of financing entities:

1. Verify the existence of a fixed monthly income for the customer (such as salary or similar) before accepting a request to establish a standing order in favor of a financing entity.
2. Obtain the customer's declaration acknowledging the consequences of establishing a standing order in favor of a financing entity; according to the declaration format shown in the Appendix.
3. Notify the customer when establishing a standing order in favor of a financing entity via reliable communication means, ensuring the notification includes at least: the transfer amount, the start date of execution, the duration in months, the account number to which the amount is transferred monthly, and the name of the beneficiary financing entity.
4. Execute the standing order in favor of the financing entity for the full transfer amount immediately on the specified date or within (five) days from that date if funds are not available on the specified date.
5. Notify the customer if the standing order in favor of the financing entity is not executed, clarifying the reason via reliable communication means.

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6. Obtain consent from the beneficiary financing entity of the standing order or obtain a discharge letter from them when the customer requests to modify or cancel the standing order.
7. Verify that the target amount to be transferred from the customer's account is not among the amounts confirmed by the Saudi Central Bank as non-deductible or non-seizable, and also adhere to instructions related to attachment and execution and the prohibition of dealing with bank accounts when creating or executing standing orders.

B. Obligations of the Beneficiary Financing Entity The beneficiary financing entity of the standing order must adhere to 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 the rescheduling procedures.
2. Grant the customer a discharge letter and non-objection letter for canceling the standing order within (seven) business days from the date of request in the following cases:
   a. Repayment of due obligations. b. Exemption as specified in related Saudi Central Bank instructions or as stipulated in related systems and instructions or as contained in contracts.
3. Beneficiary financing entities can coordinate and agree in advance with each bank individually to receive immediate notifications or periodic data reports containing details of standing order transactions executed in their favor.
4. Notify the customer upon receiving the standing order amount via reliable communication means.

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Appendix

I declare that the standing order to settle my obligations from my bank account (IBAN No.: .........) resulting from the financing granted to me by the financing entity, and that I cannot cancel it except after providing a discharge letter from the beneficiary financing entity of this order. I also acknowledge that I do not have the right to change the monthly deduction amount or the deduction period except with the approval of the beneficiary financing entity. I further acknowledge that (the Bank/the Commercial Bank) has the right to deduct the monthly deduction amount on the specified date or within (five) days from the specified date. I acknowledge that (the Bank/the Commercial Bank) executing the standing order is not responsible for any damages that may arise from the standing order, nor does it bear any obligations arising from the execution of this order, and that (the Bank/the Commercial Bank) has the right to seek recourse against me for any damages it may suffer as a result of this order.