The book begins with an introduction to financing products and services offered by banks and financial companies in the Kingdom of Saudi Arabia, including the conditions and rules for obtaining financing products in the Kingdom, such as regulations for the issuance and operation of credit and payment cards, regulations for consumer financing, Bylaws of the Real Estate Financing Act, Financial Leasing Act, in addition to rights and obligations related to financing products. This chapter explains the financing products and services that banks and financial companies provide to individual customers in the Kingdom of Saudi Arabia, including the conditions and rules for obtaining financing products in the Kingdom, such as regulations for issuing and operating credit and payment cards, regulations for consumer finance, by-laws of the Real Estate Finance Act, standard form for real estate finance contracts (Ijara/Murabaha), rights and responsibilities of the lessor and lessee under the Finance Lease Act, rights and responsibilities in relation to financing products, and Rules for disclosure of prices of financing products and savings.
Rules for Obtaining Financing Products
- Definition of Credit and Charge Cards
- Regulations for Issuance and Operations of Credit and Charge Cards
- Issuance of Credit and Charge Cards General Requirements
- Credit Limits of Cards
- Information Disclosure Initial Disclosure
- Rights and Responsibilities of the Cardholder
- Resolution of Card-Related Disputes
A card issuer may not issue a credit or debit card without receiving a signed application from an applicant. Information about any optional features relating to the credit or debit card agreement that the cardholder accepts in writing.
Regulations for Consumer Finance
Regulations for Consumer Finance
The lender must obtain knowledge from the borrower of the purpose of the consumer financing and document it. Introducing conditions for the possibility of changing FCR or PR that affect the rights of the borrower.
Implementing Regulations of the Real Estate Finance Law
A detailed overview of the Real Estate Finance Act will be presented in Chapter II of this curriculum. Authorize cooperative insurance companies to cover property financing risks under the Cooperative Insurance Companies Control Act.
Standard Form for Contracts of Real Estate Finance (Murabaha and Ijara)
Real Estate Finance Contract in the Form of Ijara
Vacation costs of leased assets and costs to repair any material damage to the leased asset resulting from the lessee's lack of maintenance. In this case, the landlord can obtain from the tenant the following amounts (value of the early property):
Real Estate Finance Contract in the Form of Murabaha
The lessee will be considered in breach of contract if he has failed to make three consecutive payments or is late in making five separate payments for a period of 7+ working days for each payment from its due date for every 5 years of the contract term . Obtain the client's acknowledgment and knowledge of the consequences of creating a permanent payment order in favor of a real estate financier, according to the confirmation form shown in the Appendix.
Controls of a Permanent Payment Order in Favor of a Real Estate Financier
If the final payment order in favor of a real estate financier has not been completed, including justification, inform the client via reliable means of communication. The real estate financier who benefits from the permanent payment order must adhere to the following:
Rights of the Lessor and Lessee under the Finance Lease Law
The Lease Contract
Obtain the approval of the real estate financier benefiting from the permanent payment order or request a “No Liability Letter” from him when the customer requests to change or cancel the permanent payment order. Within three working days of his request, allow the customer to change the amount of the standing payment order if he experiences a change in circumstances, which in turn results in a debt restructuring.
Finance Lease Controls
The lessee will be responsible for any damage or loss resulting from the use of the leased asset. If the lessor sells the leased asset to a third party, the ownership of said asset will be transferred as charged by the contract.
Rules for Comprehensive Insurance of Motor Vehicles Financially Leased to Individuals
The rules define the rights and responsibilities of the insured "lessor and lessee" involved in the finance lease contract for private vehicles and further indicate how to calculate the value of the insurance premium each year based on changes in the sum insured and factors of the price for the renter, as well as the price of the insurance policy, the value of which is influenced by driving behaviors in order to encourage individuals to take up the 'No Claims Discount'. The rules further indicate that the determination of the method of repair and the percentage of annual depreciation of the vehicle shall be agreed upon by the lessor and the lessee at the beginning of the finance lease contract and that only the lessee shall be entitled to claim additional benefits. and determine the rate of depreciation.
Rights and Responsibilities Associated with Financing Products
Rights and Responsibilities Associated with Financing Products
The financing entity will notify the consumer by means of guaranteed communication of any change in the terms and conditions within at least (30 working days) before any change is made. The financing entity shall include all terms and conditions in the financing product or service application form in Arabic.
Finance Entities and Banks’ Customer Protection Principles
The financing entity will provide the updated terms and conditions to the consumer through channels available to such entity or as the customer may choose. The financing entity must provide the customer with the updated terms and conditions of the financing product and service, either in the form of a booklet or through other channels available to financing entities.
Rules for Disclosing the Prices of Financing and Saving Products
Rules for Disclosing the Prices of Financing and Saving Products
Disclosure Requirements A
Funding limits, charges and rates shall be subject to the relevant laws, regulations and any other regulatory requirements. Disclosure must be made for all types of products, exposure classes and tenors within the scope of these rules.
Disclosure Forms
The calculation process and the factors affecting the price setting should be clarified for transparency purposes e.g. if variable rates are used, this should be clarified. If one of the disclosure requirements in the disclosure forms is not applicable to a product, it should be clarified in the disclosure form as "Not Applicable - N/A" provided that a reasonable justification is provided.
Chapter one
End - of - Chapter Questions
Answer the following questions and check your answer in the corresponding section
Chapter Two
Financing Mechanism
Introduction
Factors Affecting the Acceptance of Applications for Financing Individual Customers
This means the capacity of banks or FIs, especially in terms of qualified and trained capabilities to perform credit functions as well as modern technology they use. The bank must comply with laws and regulations issued by SAMA, which determine the possibility to extend or reduce loans, as well as loan limit and areas of activity allowed to be financed, to avoid any conflict between the bank's credit policy and legislation regarding banking activities. This involves the areas or activities in which the borrowed funds are invested and how far they correspond with the financial institution (FI) policy and client's abilities, expertise and credit profiles as well as the extent to which the size and amount of financing is suitable for the client's purposes .
Responsible Lending Principles for Individual Customers
- Definitions
- Qualitative Principles of Responsible Lending
- Quantitative Principles of Responsible Lending
Monthly credit obligations, with the exception of monthly credit obligations for real estate financing, may not exceed 45% of the customer's total monthly income. Monthly credit obligations may not exceed 65% of the customer's total monthly income. What are the conditions that must be taken into account when calculating the client's monthly credit obligation in the quantitative principles of responsible lending.
Chapter Three
Introduction to Operational Risk Management
- Unusual and Suspicious Transactions and Procedures of Dealing therewith
- Definition of Unusual and Suspicious Transactions
- Indicators of Unusual and Suspicious Transactions
- KSA Legal Framework for AML/CTF
- KSA Legal Framework for AML/CTF
- KSA AML/CTF Initiatives
- Administrative Reference for Unusual and Suspicious Transactions (Compliance Department The Role of Audit
- Determining the Administrative Reference for Handling Unusual and Suspicious Transactions
- Regulatory Procedures for Dealing with Unusual and Suspicious Transactions
- Regulatory Procedures for Dealing with Unusual and Suspicious Transactions
The AML/FTF Compliance Officer operates independently and must liaise technically and administratively with the Board of Directors and its committees. The AML/FTF compliance officer ensures the bank's compliance with the Rules governing the prevention of money laundering and terrorist financing and KYC principles, including the Rules for opening bank accounts and the General Rules for their operation. Financial institutions use AML/CTF programs in all of their branches and majority-owned subsidiaries.
Chapter Four
Customer Credit Risk
- Customer Credit Risk and Impact Thereon
- Customer Credit Risk
- Financial Objectives Consistent with the Customer’s Financial Position
- Financial Objectives Consistent with the Customer’s Financial Position
- Collection Regulations and Procedures
- Collection Regulations and Procedures
- Procedures for Dealing with Defaulting Customers
- Procedures for Dealing with Defaulting Customers
Knowledge of financial goals that are consistent with the client's financial situation. The rulings issued by the officials confirmed that banks must restructure the debt at the request of the small consumer when a convincing change in the circumstances of the small consumer is demonstrated, without approving any new loan, charging additional fees or changing the cost of the term. At the request of a natural person, the bank must reprogram the debt when a necessary change in the circumstances of the small person is proven, without approving a new loan, charging additional fees or changing the term costs.
Chapter FIVE
Self-Management and Work Ethics in Financial Institutions
Understanding the nature of targets and how to identify them, whether at the level of individual or establishment in which he works
- Definition of Targets
- Setting of Targets
- How to Set Targets
- Setting Targets at the level of individual and establishment
In this discussion, the employee's targets and role in his department and in achieving his target are agreed. Therefore, it is natural that the targets of the department and employees are integrated within FI's targets and plans, and then support and help achieve them. At the level of the team, they are specifically linked to that team's targets, and its expected contribution to achieving the division or department's targets.
Targets That Are Achievable in Agreement with the Line manager
- Setting achievable targets
Performance Measurement using the Employee Record and Balanced Score Card
- Maintain Employee Performance Records in Accordance with FI Processes
- Concept of Performance Record
- Sources of Job Performance Assessment
- Elements of Performance Record
- Balanced Score Card (BSC) and Performance Measurement
The ability to take the lead in developing the field and to find solutions to problems that arise, for example: (The employee spares no effort to improve the performance of the department in general with the opportunity to achieve greater take on responsibilities). Identify the employee's ability to make a decision among several decisions for solving a work problem. Monitor and assess implementation results against established objectives and rates, and reward the employee for performance in accordance with the assessment results.
Activities According to the Identified Performance Targets Priorities and Determination of a Relative Weight for Each Target
- Classification of Activities and Determination of a Relative Weight for Each Target
We might enjoy the balanced scorecard process so that we can define dozens of performance indicators. In addition, it is difficult to select performance indicators whether the BSC is used or not. In addition, goals and relationship to strategy may not be clarified, so there is no avoidance of goals and strategy.
Effective performance standards and how to measure, analyze and improve it
- Effective Performance Standards
Priorities to Be Committed to by Management, and How to Use Time and Resources Available to Meet the Required Targets and
- Binding to Time Dimension
- Considerations to Be Observed in Setting Targets
- Target Classifications
- Relationship between Targets and Motivation
They represent objectives of a narrow nature and are of great importance to achieve key objectives, such as (achieving a number of insurance policies per month). An incentive means to develop the desire to exert a higher level of effort to achieve the objectives of the FI, provided that these efforts lead to the satisfaction of some individual needs. The individual needs such incentives, because his internal motivations are not the only thing that pushes him towards development and success.
Code of Ethics and Professional Conduct in FIs
- Introduction A. Purpose
- Definitions
- Code of Ethics and Professional Conduct
- Consequences of Non-Compliance with the Code of Ethics and Professional Conduct
In addition, all information related to the FI's Stakeholders or Staff must be the property of the institution. Gifts and awards that could damage the reputation of the FI must not be accepted or requested. It should be the duty and responsibility of the FI to protect the confidentiality of stakeholder information.
Chapter Five
Glossary of Terms & Abbreviations
Failure by the Cardholder to comply with the terms and conditions of the credit or debit card agreement, resulting in failure to pay the monthly installment by the Cardholder for 90 calendar days from the due date. Maximum or total amounts available for customer use depending on the financing contract. Any personal benefit that can be realized by one of the FI employees based on their work nature, position or granted authorities.
Important Terms & Expressions
Multiple Choice Questions
- SAR 18,000
- SAR 24,000
- SAR 27,000
- SAR 30,000
Q37: The Financial Entity's Responsibilities Before or Upon the conclusion of the Financing Agreement include. Monthly credit obligations of financing may not exceed 75% of the total monthly income of the customer. Monthly credit obligations of financing may not exceed 60% of the total monthly income of the customer.
Answers
Answer: A Reference: Chapter II Section Section 1.4 Consumer: Any person targeted by real estate financing services. Answer: A Reference: Chapter I Section 1.6.2 The lessor bears all insurance costs for the leased asset. Answer: B Reference: Chapter II Section 2.1.1 Liquidity means the FI's ability to meet its obligations.
Curriculum Maping
4. Be familiar with the Implementation Regulations of the Real Estate Financing Act. Be familiar with the rights of landlord and tenant under the Financial Lease Act. Be familiar with the financial objectives that match the customer's financial position.
