SAMA's decisions: Banks are obligated to reschedule loans in force majeure circumstances
Introduction to the Saudi Central Bank's directives
The Saudi Central Bank (SAMA) has issued decisive directives obligating all financing institutions and banks operating in the Kingdom of Saudi Arabia to reschedule the debts of customers who have experienced unavoidable changes in their living or working circumstances. This strategic step comes as part of the monetary authority's commitment to ensuring fairness and transparency in financial transactions and providing a financial safety net that contributes to the economic and social stability of individuals and families.
General context and historical role of SAMA
Historically, the Saudi Central Bank (SAMA) has played a pivotal role in safeguarding the national economy and ensuring the stability of the banking sector. These new directives align with the objectives of the Financial Sector Development Program, a key component of Saudi Vision 2030, which aims to build a thriving and stable financial sector. SAMA has consistently been at the forefront of issuing regulations that balance bank profitability with consumer protection, making the Saudi banking sector one of the most robust and reliable regionally and internationally.
Details of the decision and guarantees for customer protection
The Central Bank clarified that if a customer is proven to have faced force majeure circumstances beyond their control, the financing entity is obligated to immediately reschedule the debt. To ensure that the customer's need is not exploited, SAMA has established strict conditions prohibiting financing entities from forcing the customer to obtain new financing to cover the existing loan. Furthermore, imposing any additional administrative fees or expenses related to the rescheduling process is strictly prohibited, with a strong emphasis on adhering to the pre-agreed cost of the loan (profit margin) without any increase that would burden the borrower.
Rapid implementation mechanisms and suspension of deductions
To ensure the effectiveness of the decision and a swift response, the Central Bank mandated two strict implementation mechanisms for financing entities. The first mechanism requires completing the rescheduling process within a maximum of 20 working days from the date the client submits the required documents. The second mechanism, and the most important for alleviating the immediate burden, involves temporarily suspending the deduction of monthly installments until all rescheduling procedures are finalized, thus providing the client with financial relief during their crisis.
Cases covered by mandatory circumstances
The Central Bank has identified clear examples of cases that require this urgent intervention, including: total or partial inability to work due to health conditions, compulsory retirement whether due to reaching the legal age or by administrative decisions, and job loss for reasons beyond the client’s control and not due to his misconduct or negligence.
Local and regional economic and social impact
Domestically, this decision contributes to strengthening social stability by protecting the working class from financial distress and bankruptcy, thus preserving citizens' purchasing power. It also benefits banks by reducing the percentage of non-performing loans and facilitating flexible repayment processes. Regionally and internationally, this decision enhances the reputation of the Saudi financial sector as a leading model in implementing global best practices for financial consumer protection, especially as these directives coincide with World Consumer Rights Day initiatives, underscoring the Kingdom's commitment to international standards in protecting customer rights and providing a sustainable and fair financial environment.
