Interest Rates on Assets and Liabilities Reporting Guidelines

In the name of Allah, the Most Gracious, the Most Merciful Saudi Arabian Monetary Authority (SAMA) Head Office Banking Policy Department Ref No.: 42009284 Date: 19/02/1442 AH (September 8, 2020) Attachments: 15 pages

Circular

To the Esteemed, Peace, mercy and blessings of Allah be upon you, Subject: Guidelines and Templates for Assets and Liabilities Interest Rates Report.

With reference to SAMA Circular No. 391000006126 dated 18/01/1439 AH and Circular No. 33788/67 dated 30/05/1440 AH, which issued the prudential return template for commissions on deposits, loans, bonds and other instruments.

Please be informed that the guidelines and templates for the Assets and Liabilities Interest Rates Report have been updated (attached), which cancel and supersede the guidelines and templates issued under the aforementioned circulars. The Authority emphasizes that all banks must submit the report to SAMA quarterly within thirty days from the end of each quarter, and that it must be signed off by the Chief Financial Officer (CFO) of the bank.

For your information and action, effective from the fourth quarter of 2020.

Yours sincerely, Fahad bin Ibrahim Al-Shathri Deputy Governor for Supervision

Distribution Scope:

• Banks and financial institutions operating in the Kingdom.

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Saudi Arabian Monetary Authority (SAMA) Interest Rates on Assets and Liabilities Reporting Guidelines

September 2020

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Table of Content

General ................................................................................................................................... 3 Scope and Submission ............................................................................................................ 3 Reporting Guidance ................................................................................................................. 3 Reporting Categories ............................................................................................................... 4 A. Assets ............................................................................................................................. 4 B. Liabilities ........................................................................................................................ 6 Annexure – 1 .......................................................................................................................... 8 Annexure – 2 .......................................................................................................................... 9 Annexure – 3 .......................................................................................................................... 11

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Interest Rates on Assets and Liabilities Reporting Guidelines

General The objective of these guidelines is to facilitate the preparation of the reports on Assets and Liabilities Interest Rates.

These Guidelines shall supersede Saudi Arabian Monetary Authority (SAMA) Guidance note for Quarterly Prudential Returns on Loans and Deposits Commissions issued vide SAMA circular no. 33788/67 dated 30/05/1440AH. The changes from the previous version are underlined.

Scope and Submission All banks operating in Saudi Arabia including foreign banks’ branches must submit the reports to SAMA quarterly within 30 calendar days following the quarter end. Reports should be completed at a domestic level only, and must be signed off by the Chief Finance Officer (CFO) before submission to SAMA.

The report should be submitted in excel format via Email to: BankingDataSection@SAMA.GOV.SA

Reporting Guidance Banks should comply with the following in completing the report related to Assets and Liabilities interest rates:

A. Assets and Liabilities Weighted Average (W.A) rates and balances should be submitted as following:

• Template (1) - by Product: Categorization based on product type for example: loans, investments, placement with SAMA, bonds and deposits.
• Template (2) - by Sector: Categorization based on the International Standard Industrial Classification (ISIC4).
• Template (3) - by Type Sharia-compliant or Conventional: Categorization based on the bank’s classification of each product Sharia-compliant or conventional.

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B. Assets and liabilities W.A Rates, Balances and Maturity should be reported as follows:

• W.A Rates: Include annual contractual rates on Assets and Liabilities outstanding at the end of the quarter.
• Balances: Current Quarter Balance: Includes balance sheet exposure amount booked during the quarter and still outstanding at the quarter end. Outstanding Balance: Includes total outstanding balances at the end of the quarter including the current quarter balance.
• Maturity: Includes contractual maturity used to populate the Current Quarter W.A rates and Outstanding W.A rates columns. The movement between buckets is not allowed.

Banks should calculate the W.A rate as described in Annexure – 1.

C. All classifications of Assets and Liabilities are mutually exclusive. D. Benchmark rates must be included in the rate calculation based on booking value. E. For example: SAIBOR rate on booking date + 3% per annum. F. Local and Foreign Currency Balance amount should be reported/calculated in SAR 000’s and W.A rates in percentage terms. G. All data for calculating the W.A rate should be related to M1 Domestic (Resident by Local and Foreign Currency) as described in Annexure – 2.

Reporting Categories

A. Assets: Accrued rates receivable.

1. Loans to Governments and Quasi Government Loans to all Sovereign Governments and Quasi Government. An example guidance list in Annexure - 3.

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2. Loans to Financial Institutions (Excluding Banks) Loans to Insurance companies, Finance companies, Authorized Persons, Exchange companies and any other financial institution excluding Banks.

3. Loans to Corporates 3.1 Public Non- Financial Corporates: Loans to commercial entities in which the Saudi Government or Entities Connected with Saudi Government owns (directly or indirectly) 50% or more of shareholdings. An example guidance list in Annexure - 3.

3.2 Large Corporates, 3.3 Medium, 3.4 Small and 3.5 Micro Enterprises: Defined as per SAMA circular No.381000064902 dated 16/06/1438 or any subsequent definition by SAMA.

3.6 Kafalah Guaranteed Loans: Loan to enterprises guaranteed by Kafalah fund and must be excluded from being reported in Medium, Small and Micro Enterprises rows.

3.7 Commercial Real Estate: Commercial mortgage or commercial real estate loan to finance a commercial real estate asset. These must be excluded from being reported in Large Corporates, Medium, Small and Micro Enterprises Loans rows.

3.8 Other Businesses: Includes any other loans not already classified in above categories.

4. Retail Loans 4.1 Consumer Loans: Loans to individuals and households, granted on the following basis:

• Granted by the creditor to a borrower as a secondary activity for the borrower, i.e. outside the scope of the borrower’s principal commercial or professional activity. It would generally include personal loans, overdraft facilities, car loans, payment card loans, etc.
• To finance purchase of goods and services for consumption and other such requirements of individuals as identified above e.g. to purchase furniture, household items, home improvement, vacations, education, etc.

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4.2 Credit Cards: Outstanding credit card balances. W.A rate must be reported based on contractual Annual Percentage Rate (APR) for this category.

4.3 Mortgages or Housing Loans: Mortgage or Housing loan to finance a real estate asset. These must be excluded from being reported in Consumer Loans rows.

4.4 Other Loans: Any other loan not already classified in above categories.

5. Loans to Banks 5.1 Interbank Loans: Bank-to-bank loan placement in the Money Market only.

5.2 Vostro and Nostro Accounts: NOSTRO and VOSTRO accounts with debit balances.

5.3 Other banks Loans: Any other loan between banks not already classified in the above category such as secured loans between banks.

6. Investments Investments in T-Bills (SAMA Bills and other T-bills), Bonds, fixed and floating rate securities issued by Government and quasi government, corporate, banks and other financial institutions and other counterparties.

7. Placements with SAMA Reverse repo placements with SAMA.

B. Liabilities: Accrued rates payable.

8. By product type 8.1 Demand Deposits: Represent non-special commission bearing customer deposits that have no maturity and can be withdrawn without prior notice. These deposits also include current accounts. If a bank does not pay any commission rate on the demand deposits, the balance should be calculated with 0% rate.

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8.2 Saving Deposits: Represent non-checking special commission bearing customer deposits with no defined maturity.

8.3 Time Deposits: Represent special commissions bearing customer deposits with a defined maturity.

8.4 Other Deposits: Any other deposits not already classified in the above category such as Repos, Swaps transaction with SAMA and other.

9. By counterparties 9.1 Deposits from Government and Quasi Government, 9.2 Deposits from SAMA, 9.3 Deposits from Financial Institutions (Excluding Banks), 9.4 Deposits from Corporates (excluding MSMEs), 9.5 Deposits from MSMEs and 9.6 Deposits from Retail customers: Total Deposits by Product Type (Total Balances and W.A rates) should equal to Total Deposits by Counterparties (Total Balances and W.A rates).

10. Margin Deposits Including all deposits received in relation to transaction in exchanges.

11. Bonds and Debt Securities: Issued by banks.

12. Deposits from Banks 12.1 Interbank deposits: Deposit received from other banks in the Money Market only.

12.2 Vostro and Nostro Accounts: NOSTRO and VOSTRO accounts with credit balances.

12.3 Other Deposits: Any other deposits between banks not already classified in the above category such as Repos.

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Annexure – 1: Example of Calculating Weighted Average Rates

Below is an example of computing the weighted average rate for a given period end balance amount of SAR 360 Million.

1	2	3= (1*2)
Rates	Balance In 000's	Rates multiplied by Balance
0%	30,000	-
1%	50,000	500
2%	60,000	1,200
4%	80,000	3,200
5%	90,000	4,500
8%	20,000	1,600
10%	30,000	3,000
Total	360,000	14,000
WA Rates = (3/2)*100		(14000/360000)*100
Weighted Average Rate		3.89%

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Annexure – 2: Validation table

The Table explains each item on the interest rates report on assets and liabilities and its Match in M1. Also it indicates in which template each item would be reported.

• Assets

Item from Interest Rates on Assets report	M1 match	Template (1)	Template (2) *	Template (3)
1. Loans to Governments & Quasi Government	9. Credit Facilities ( 9.12 , 9.22 and 9.32 Govt. & Quasi-Govt.) excluding public non-financial corporates	✓	✓	✓
2. Loans to Financial Institutions (Excluding Banks)	6. Due From Other Financial Institutions	✓	✓	✓
3. Loans to Corporates	9. Credit Facilities ( 9.11,9.21 and 9.31 Private) including Public non-financial corporates	✓	✓	✓
4. Retail Loans	9. Credit Facilities ( 9.11,9.21 and 9.31 Private)	✓	✓	✓
5.Loans to Banks	4. Due From Commercial Banks 5. Due From Specialized Banks 8. Due From OBU's	✓	✓	✓
6. Investments	10.1 Marketable Securities 10.2 Govt. Bonds & Govt. Gteed Bonds 10.312 Trading 10.322 Investments	✓		✓
7. Placements with SAMA	2.6 Others	✓		✓

Notes:

• Assets on Template (2) should be allocated based on the sector.

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• Liabilities

Item from Interest Rates on Liabilities report	M1 match	Template (1)	Template (2) **	Template (3)
8. Total Deposits (By Product Type)	15. Due to SAMA * 21. Govt. & Quasi-Govt. Deposits and 22. Private Sector Deposits	✓	✓	✓
9. Total Deposits (By Counterparties)	15. Due to SAMA 18. Due to Other Financial Institutions 21. Govt. & Quasi-Govt. Deposits and 22. Private Sector Deposits	✓	✓	✓
10. Margin Deposits	23. Marginal Cash-Deposits	✓
11. Bonds/ debt securities Issued by Banks	28. Subordinated Loans	✓		✓
12. Deposits from Banks	16. Due to Commercial Banks 17. Due to Specialized Banks 20. Due To OBU's	✓	✓	✓

Notes: *Due to SAMA are not included in Template (2). **Liabilities on Template (2) should be allocated based on the sector.

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Annexure – 3: Examples of Governments and Quasi Government and Public Non-Financial Corporates

• Governments and Quasi Government:

  • Government Universities
  • Ministries
  • Municipalities
  • Government Authorities
  • General Organization for Social Insurance (GOSI)
  • Social Development Bank
  • Public Investment Fund (PIF)

• Public Non- Financial Corporates:

  • SABIC- Saudi Arabian Basic Industries
  • Saudi Arabian Airlines
  • Saudi Arabian Minings (Ma'aden)
  • Saudi Electricity Corporations
  • Saudi Telecom Company