The importance of adhering to regulations related to the commercial environment and credit transactions

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

Saudi Central Bank
Headquarters

Office of the Deputy Governor for Supervision

Ref. No.: 42016471
Date: 16/03/1442 AH
Attachments: None

Circular

To the Esteemed,

Peace be upon you, and the mercy of Allah and His blessings.

Subject: The Importance of Adhering to Regulations Related to the Commercial Environment and Credit Transactions.

I refer to the Registered Mortgage System issued by Royal Decree No. (M/49) dated 13/08/1433 AH, the Bankruptcy System issued by Royal Decree No. (M/50) dated 28/05/1439 AH, the Commercial Mortgage System issued by Royal Decree No. (M/86) dated 08/08/1439 AH, and the Movable Property Security Rights System issued by Royal Decree No. (M/94) dated 15/08/1441 AH, along with their executive regulations.

Given the importance of these systems in preserving and stabilizing the commercial environment in the Kingdom, the close linkage of many credit transactions to their provisions, the importance of adhering to these regulations, and achieving financial stability and protecting transactions; the Institution wishes to confirm to all financing entities the following:

1. The credit risk assessment must cover the risks of initiating bankruptcy proceedings, and verify the existence and adequacy of procedures and mechanisms in this regard.
2. Ensure that transactions related to mortgages and securities/collaterals comply with the provisions of the aforementioned systems, as well as other relevant regulations.

For your information and action, effective from its date, Yours sincerely,

Fahd bin Ibrahim Al-Shathri
Deputy Governor for Supervision

Distribution Scope:

• Banks operating in the Kingdom.
• Financing companies operating in the Kingdom.