The following terms and phrases, where used in these Rules, shall have the corresponding meanings, unless the context requires otherwise:
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| i. | SAMA: The Saudi Central Bank.
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| ii. | Rules: Related Parties Rules for Banks.
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| iii. | Exposure/Transaction: both on and off-balance sheet exposures/transaction included in either the banking or trading books, and instruments with counterparty credit risk under the Basel risk-based capital framework. Banking and trading books have the same meaning as under the Basel risk-based capital framework. Additionally, all Shari’ah Based products and Shari'ah Compliant product exposures/transaction, including but not limited to; service contracts, asset purchases and sales, construction contracts, lease (ijarah) contracts, financings, borrowings (through Qard) and write-offs.
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| iv. | Eligible Capital Base: is the effective amount of Tier 1 capital fulfilling the criteria defined in the Basel III Framework.
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| v. | Control Relationship: control relationship will be deemed to exist automatically if one entity owns more than 50% of the voting rights of another entity. In addition, banks must determine whether a control relationship exists using the following criteria:
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| | a. | Voting agreements (e.g. control of a majority of voting rights pursuant to an agreement with other shareholders);
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| | b. | Significant influence on the appointment or dismissal of an entity’s administrative, management or governing body, such as the right to appoint or remove a majority of members in those bodies, or a majority of members have been appointed solely as a result of the exercise of an individual entity’s voting rights;
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| | c. | Significant influence on senior management, e.g. an entity has the power, pursuant to a contract or otherwise, to exercise a controlling influence over the management or policies of another entity (e.g. through consent rights over key decisions);
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| | | Banks are also expected to refer to criteria specified in appropriate internationally recognized accounting standards (The International Financial Reporting Standards - IFRS are applied to all banks in KSA) for further qualitatively based guidance when determining control.
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| vi. | Related Party:
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| | a. | Substantial Shareholders of the bank.
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| | b. | Board members of the bank or any of its subsidiaries/ affiliates (Associates and joint venture as per the definitions giving by the accounting standards) and their relatives.
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| | c. | Shariah Committee Members of the bank (as appointed under the provisions of Shariah Governance Framework issued via SAMA circular no. 41042498 dated 18/06/1441 H and any future amendments on the framework), or their relatives.
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| | d. | Seniors Executives of the bank or any of its subsidiaries/ affiliates and their relatives.
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| | e. | Board members and Seniors Executives of Substantial Shareholders of the bank.
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| | f. | Entities other than companies owned by the following:
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| | | a. | Board members of the bank or their relatives.
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| | | b. | Shariah Committee Members of the bank or their relatives.
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| | | c. | Seniors Executives of the bank or their relatives.
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| | g. | Companies in which of the following is a member of its Board of directors or is one of its Senior Executives or has influence on the company’s decisions even if only by giving advice or guidance:
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| | | a. | Board members of the bank or their relatives.
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| | | b. | Shariah Committee Members of the bank or their relatives.
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| | | c. | Seniors Executives of the bank or their relatives.
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| | h. | Non-joint stock companies in which the following is partner:
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| | | a. | Board members of the bank or their relatives.
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| | | b. | Shariah Committee Members of the bank or their relatives.
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| | | c. | Seniors Executives of the bank or their relatives.
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| | i. | Joint stock companies in which the following owns (5%) or more:
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| | | a. | Board members of the bank or their relatives.
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| | | b. | Shariah Committee Members of the bank or their relatives.
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| | | c. | Seniors Executives of the bank or their relatives.
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| | j. | Subsidiary/ affiliate.
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Advice or guidance that is provided on a professional basis by a person licensed to provide such advice shall be excluded from the provisions of paragraph (g).
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| vii. | Relatives:
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| | a. | Fathers, mothers, grandfathers and grandmothers.
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| | b. | Children, grandchildren.
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| | c. | Siblings, maternal and paternal half-siblings.
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| | d. | Husbands and wives.
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Where dependence criteria for relatives/ family members has been identified based on the Related Party definition, a bank may still demonstrate to SAMA in exceptional cases, that the family members clearly operate all business activities independent of each other with no economic interdependence, financial support or shareholding from the other family member.
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| viii. | Substantial Shareholders: any person who owns 5% or more of the shares of the bank or voting rights therein.
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| ix. | Security: means such security as would, in the opinion of the SAMA, be acceptable to a prudent banker and satisfies the following criteria:
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| | a. | The market value of the asset is readily determinable or can be reasonably established and verified.
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| | b. | The asset is marketable and there exists a readily available secondary market for disposing of the asset.
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| | c. | The bank’s right to repossess the asset is legally enforceable and without impediment.
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| | d. | The bank is able to secure control over the asset if necessary.
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| | e. | The bank has the expertise and systems to manage the asset concerned.
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| x. | Senior Executive: the Managing Director, Chief Executive Officer, General Manager, their deputies, Chief Financial Officer, Managers of key departments, officers of risk management, internal audit, and compliance functions, and similar positions in the Bank, in addition to incumbents of any other positions determined by SAMA.
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