Definition of Commercial Mortgage

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

Saudi Central Bank Headquarters

General Directorate for Supervision of Finance Companies

Ref: 381000074831 Date: 14/07/1438 Attachments:

Circular

To: Respected Sir, Greetings:

Subject: Definition of Commercial Mortgage Financing.

Based on the powers granted to the Saudi Central Bank under the Saudi Central Bank System issued by Royal Decree No. (23) dated 23/05/1377H, the Bank Supervision System issued by Royal Decree No. (M/5) dated 22/02/1386H, and the Finance Companies Supervision System issued by Royal Decree No. (M/51) dated 13/08/1433H.

And whereas it has been observed that there are disparities and differences in the definition of (Commercial Mortgage Financing), and with the aim of unifying the definition and its scope, Commercial Mortgage Financing is defined as granting credit to a natural or legal person for the purchase, development, or construction of real estate. Financing granted is considered commercial mortgage financing if one or more of the following criteria are met:

1. If the beneficiary is a legal entity.
2. If the financed property contains five or more residential units.
3. If the financed property is primarily used for non-residential purposes.
4. If the financed property is an income-generating property.

For information, action, and ensuring the updating of policies and procedures submitted to the Saudi Central Bank in accordance with this, effective from the third quarter of 2017.

Accept my regards,

Ahmed bin Abdullah Al Sheikh Deputy Governor for Supervision

Distribution Scope:

• Banks and commercial banks operating in the Kingdom.
• Finance companies operating in the Kingdom.
• The General Secretariat of Banking and Finance Disputes and Violations Committees.
• Supervision Agency Departments.
• The Saudi Central Bank website.

P.O. Box: 2992, Riyadh: 11169, Phone: +966 11 4662020, Fax: +966 11 4662488