Rules on Management of Problem Loans

Valuation Frequency i. Banks should clearly document in collateral policies and procedures the frequency of collateral valuations. The policies and procedures should also provide for the following: a) Banks monitor the value of each type of collateral on a defined frequent basis. b) More frequent valuations where the market is subject to significant negative changes and/or where there are signs of a significant decline in the value of an individual collateral. c) Defined criteria for determining that a significant decline in collateral value has taken place. These will include quantitative thresholds for each type of collateral established, based on the observed empirical data and qualitative bank experience, taking into consideration relevant factors such as market price trends or the opinion of independent valuers. d) Revaluation of collateral for restructuring cases should be done only where necessary, and should be done in accordance with the requirements of these rules. ii. Banks should have appropriate IT processes and systems in place to flag outdated valuations and to trigger valuation reports. 7.6 Specific Requirements for Valuers Banks valuation process should be carried out by valuers who possess the necessary qualifications, ability and experience to execute a valuation and who are independent of the credit decision process. Banks should ensure compliance with SAMA circular no. 371000061185 dated 28/05/1437AH on "Obligations of Real Estate Appraisal Clients Subject to SAMA Supervision" and the revision made to the said circular through circular no. 65768/99 dated 25/10/1439AH along with all relevant regulatory requirements in that regard. 8. Regulatory Reporting Requirements Banks are required to submit to SAMA on a quarterly basis all Restructuring Cases (Responses should only cover restructuring cases of “Problem loans” as defined in section 1.4 of these Rules) and Associated Fees as per the templates provided by SAMA. The reports should be submitted within 30 days of quarter end. 9. Effective Date These Rules should come into force with effect from the 1 st of July 2020.