SAMA Rules on Management of Problem Loans and Bancassurance Activities
SAMA issued rules and guidelines on the management of problem loans. SAMA issued the guidelines as good practices to support banks in implementing the rules on management of problem loans. SAMA also published the draft rules governing bancassurance activities. These activities are defined as marketing and distribution of insurance products by a bank to its clients on behalf of an insurance company. Additionally, SAMA published the Sharia governance framework for banks, to implement effective Sharia governance requirements for banks and to align Islamic banking transactions with the provisions and principles of Sharia.
Rules and Guidelines on Management of Problem Loans—The rules are applicable for all banks licensed under Banking Control Law. SAMA rules include requirements on the early prevention and identification of problem loans where banks should develop a clear, robust, and demonstrable set of policies, procedures, tools, and governance around the establishment of early warning signals, which are fully integrated into banks’ risk management systems. The objectives of the rules are to ensure that banks
- Put in place a conceptual framework, which would facilitate rehabilitation of viable borrower, thereby supporting economic activity
- Look into aspects of customer conduct and fair treatment whilst dealing with problem loans, especially in instances involving the micro, small and medium enterprises
- Have adequate controls over nonperforming and problem loan management and restructuring processes, including documented policies and procedures
Draft Rules Governing Bancassurance Activities—The objective of these rules is to regulate bancassurance activities and practices in Saudi Arabia and the associated relationship between the insurance company and the bank. The key topics covered in the draft rules are related to requirements for practicing bancassurance activities, bank and insurance company's obligations, rules of professional conduct, agreement termination procedure, and consequences of non-compliance. The rules require that the bancassurance activities shall be practiced directly through the bank. The contractual relationship between the insurance company and the bank (in the context of conducting bancassurance activities) shall not include insurance agency, insurance brokerage, insurance advisory, or any insurance-related profession, but merely establishing a channel for marketing and distribution.
Sharia Governance Framework for Banks—This framework aims to enhance the environment for compliance with the legal provisions and principles of banks. It also aims to define the tasks and responsibilities of the Board of Directors, the executive management, the Sharia committee, compliance management, risk management, and the internal audit department, regarding implementation of the requirements of this framework.
Related Links
- Summary of Rules and Guidelines on Management of Problem Loans (PDF)
- Rules on Management of Problem Loans (PDF)
- Guidelines on Management of Problem Loans (PDF)
- Consultation on Rules Governing Bancassurance Activities
- Sharia Governance Framework for Banks (PDF in Arabic)
Keywords: Middle East and Africa, Saudi Arabia, Banking, Insurance, NPLs, Governance, Bancassurance Activity, Sharia Governance, Islamic Banking, SAMA
Previous Article
EC Rule Updates Data for Calculations Under Solvency II ReportingNext Article
FDIC Publishes Annual Report for 2019Related Articles
BoE Clarifies Approach to Treatment of Payment Holidays on Form PL
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
BoE Provides Reporting Update on Form AS and Form FV
BoE updated the known issues document for the statistical reporting Forms AS and FV.
FED Announces Capital Requirements for Large Banks
FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.
SRB Publishes Guidance on Implementation of Bail-In Tool
SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.
BIS Publishes Update on G20 TechSprint Initiative
BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.
OSFI Provides Update on Implementation of IFRS 17 in Canada
OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.
EBA Provides Clarity on Implementation of Guidance on COVID Reporting
EBA updated the report on the implementation of selected COVID-19 policies.
FSI Note Discusses Challenges Associated with COVID Relief Measures
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
BCBS Consults on Principles for Operational Risk and Resilience
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
BoE Updates Template and Definitions for Form ER
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.
