Deposit Taking Finance Companies (DTFCs) Regulations

Current Year 50% Un-audited After Tax Profits This is 50% of the current year to date un-audited after tax profits. The DTFC must have made adequate provisions for loans and advances, depreciation, amortization and other expenses. In arriving at the applicable figure, any proposed or interim dividends have to be taken into account. This should however exclude reserves arising from revaluation of investment properties and cumulative unrealised gains and losses on financial instruments. In case of a loss, full amount should be included. 1.1.5 Capital Grants These are donations to be on lent to customers that are irredeemable or non-repayable. 1.1.6 Non-cumulative irredeemable preference shares These are shares, which have a standing claim on the company every year, but the claim is not carried forward in event of not being paid and they are not redeemable. 1.1.7 Other reserves These are all other reserves, which have not been included above. Such reserves should be permanent, unencumbered, uncallable and thus able to absorb losses. Further, the reserves should exclude cumulative unrealised gains and losses on available-for- saleinstruments. 1.1.8 Sub-total Enter in this line the sub-total of all the items from 1.1.1 to 1.1.7. 1.1.9 Investments in subsidiary institutions and equity instruments of other financial institutions To prevent multiple use of the same capital resources in different financial institutions, the DTFC should deduct any investment in subsidiaries conducting banking or FC business and equity instruments of other such institutions. 1.1.10 Goodwill This is the difference between the value of the business as a whole and the aggregate of the fair values of its separable net assets at the time of acquisition. 1.1.11 Other intangible assets These are assets without physical existence, e.g. patents, copyrights, formulae, trademarks, franchise etc. However, computer software should not be deducted. 1.1.12 Total deductions This is the total of all the items from 1.1.9 to 1.1.11. 1.1.13 Core Capital Core Capital is the deduction of line 1.1.12 from line 1.1.8. 1.2 Supplementary Capital (Tier 2) 1.2.1 Revaluation reserves This is the revaluation reserves of fixed assets, land and buildings based on independent and professional appraisal as to the obtaining SAMA's approval. 1.2.2 Cumulative irredeemable preference shares These are irredeemable shares with standing claim on the company and the claim is carried forward in event of it not being paid in the current year. 1.2.3 Convertible notes and similar capital investments Convertible notes are instruments that evidence a company promise to pay a loan on maturity, which can be converted, into shares any time before maturity date. Other similar capital investments are convertible debentures, bonds, loans etc. 1.2.4 Perpetual subordinated debt This Is a debt equity or loan capital, which is not redeemable. 1.2.5 Limited life redeemable preference shares These are preference shares with limited life of at least five years and are redeemable. 1.2.6 Term subordinated debt This refers to loan capital, bonds, commercial paper or debt equity with original maturity period of five years and above. 1.2.7 Statutory Loan Loss Reserve These are provisions that have been appropriated from retained earnings (revenue reserves). This will only apply if provisions computed under quality requirements is in excess of impairment losses computed under International Financial Reporting Standards. However, loan loss reserve qualifying as supplementary capital should not exceed 1.25% of risk weighted assets total value. 1.2.8 Total supplementary capital This is the sub-total of the items in line 1.2.1 to 1.2.7.