3. Bank Calculation Methodology

The key terms set out in the above table and subsequently in this document will be defined as following: ■ Spread Percentage: As of the date of this Circular, the Spread Percentage is 16 per cent and represents the difference between SAIBOR and SAIBID across all relevant tenors for the most recent five years of publicly available data. The Spread Percentage will be applied to each submission in order to create the SAIBOR submission. The appropriateness of the level of Spread Percentage will be reviewed regularly on at least an annual basis and more frequently if required by market conditions. Under the review process, the benchmark administrator will consult with the panel of contributing banks and will amend the Spread Percentage subject to approval by SAMA. ■ Spread Cap: the Spread Percentage may be subject to a cap to be introduced and specified at the discretion of SAMA should market conditions require it. Following any such introduction of a Spread Cap, it shall be reviewed regularly on at least an annual basis and more frequently if required by market conditions. Under the review process, the benchmark administrator will consult with the contributing banks and will introduce or amend (as relevant) the Spread Cap subject to approval by SAMA. ■ Credit Spread Adjustment (Level 2): Saudi Riyal repo transactions used in Level 2 may be collateralized with any type of Saudi Riyal fixed income security. Such a secured transaction will typically be priced at a lower rate than an equivalent unsecured transaction. In order to maintain consistency with Level 1 submissions and the objective of SAIBOR, a contributor bank will use expert judgment to include a suitable credit premium in the VWAP created from the secured repo transaction(s) before making the Level 2 submission. Expert judgment may not be used for any other purpose for a Level 2 submission and is subject to the submission procedures and recording keeping requirements described under "Expert Judgment" below. The credit premium should reflect the nature and credit quality of the collateral used in the repo transaction(s) and result in a submission rate that is equivalent to an unsecured transaction rate. ■ Business Day: A "business day" for the purposes of a SAIBOR submission is defined as the 24 hour period from the start of the submission window on the previous business day until the start of the submission window on the current day of the submission. ■ Expert Judgment: - Where expert judgment is used, the panel banks have the flexibility to determine its own expert judgment approach. - Expert judgment approach must be properly documented in the SAIBOR internal submission procedures developed by each SAIBOR contributor bank. These submission procedures are subject to appropriate internal governance processes 1 . Each contributor bank will notify SAMA and the benchmark administrator of its submission procedures by no later than 31 December 2021 and at least annually thereafter. In addition, each contributor bank will notify SAMA and the benchmark administrator following any significant change to its submission procedures. In each case, notice will be provided by a contributor bank by submitting a copy of its submission procedures to SAMA and the benchmark administrator 2 . When submitting such submission procedures to SAMA and the benchmark administrator each contributor bank shall include a statement stating that the version of the submission procedures provided has been approved by its Board or its Board delegated authority. - The SAIBOR internal submission procedures and records detailing the factors and judgment used in each daily submission must be available at all times to be shared with SAMA and/or the administrator upon request.