Chapter One

Definitions

The following terms and phrases, wherever used in these Rules, shall have the meanings assigned thereto unless the context requires otherwise:

SAMA: Saudi Arabian Monetary Authority.

Finance entity: Any bank or finance company licensed by SAMA.

Disposal: Encompasses sale of finance assets, or factoring.

First party: A finance entity that intends to dispose its finance assets or their contractual rights.

Second party: An entity that possess finance assets or their contractual rights after being disposed by the first party.

Sale of assets: Transfer of the ownership of finance assets or their contractual rights to the second party.

Factoring: Sale of the rights of finance contracts to the second party, where the ownership of finance assets remains with the first party.

Recourse: Disposal arrangement whereby the first party bears the credit risk of the disposed finance assets or their contractual rights, including default risk.

Chapter Two

General Provisions

These Rules shall apply to all finance entities.
These Rules govern the disposal of finance assets or their contractual rights, whether the disposal takes the form of sale of asset or factoring.
SAMA may decline or restrict transactions of disposal of finance assets or their contractual rights based on reasons deemed relevant by SAMA, such as experience, technical capabilities, or risk level.
SAMA may exempt certain transactions of disposal of finance assets or their contractual rights from certain provisions of these rules when it deems that their nature or volume warrant such exemption.

Chapter Three

Requirements for Disposal of Finance Assets or Their Contractual Rights

The finance entity shall be in operation for at least two years prior to disposing its finance assets or their contractual rights.
The finance entity that intends to dispose finance assets or their contractual rights, shall comply with the following:

7-1 If the assets, which are intended to be disposed, are real-estate assets, there need to be a lapse of at least six months from the date of extending credit related to the assets to be disposed of, or six months from the date of first paid instalment, whichever comes later.

7-2 If the assets, which are intended to be disposed, are other than real-estate assets with contract maturity not exceeding five years, there need to be lapse of at least three months from the date of extending credit related to the assets to be disposed of, or three months from the date of the first paid instalment, whichever comes later.

7-3 If the assets, which are intended to be disposed, are other than real-estate assets with contract maturity exceeding five years, there need to be lapse of at least six months from the date of extending credit related to the assets to be disposed of, or six months from the date of first paid instalment, whichever comes later.

Chapter Four

Procedures for Disposal of Finance Assets or Their Contractual Rights

The finance entity that wishes for disposal of finance assets or their contractual rights must apply for SAMA’s no-objection attached with the following:

8-1 Disposal of finance assets portfolio or their contractual rights template (appendix 1).

8-2 Overdue Installments of finance assets portfolio template (appendix 2).

8-3 A historical record of the last (5) disposed finance assets portfolios or their contractual rights, if available (appendix 3).

8-4 A copy of the proposed contracts and agreements between first and second party. The contract shall contain all necessary information including but not limited to the following:

A. Details of the underlying parties in the contract.

B. Type of the disposal of finance assets or their contractual rights.

C. Forms of the disposal of finance assets or their contractual rights and guarantees thereto.

D. Expected date of the contract.

E. Type of the finance assets portfolio.

F. Gross and net value of the finance assets portfolio.

The finance entity can provide the second party – when it deems necessary – with data and information regarding the finance assets portfolio that intended to be disposed.
The finance entity, which intends to dispose finance assets or their contractual rights, shall apply for SAMA’s no-objection, with all the documents, templates and records as specified in these Rules, at least (15) business days prior to the expected date of the disposal.
The finance entity must provide SAMA with a copy of all concluded contracts and agreements regarding the disposal within five business days of their conclusion.

Chapter Five

Effectiveness

These Rules shall be effective from the date of their issuance.