General Provisions
Article 10
1. The SIFI must fulfil the following conditions for any resolution procedure:
a) The SIFI suffers or is likely to suffer a crisis that would threaten its existence and its ability to fulfil its obligations.
b) The SIFI experiences difficulty in fulfilling its obligations within an appropriate time, which threatens its existence if resolution procedures are not invoked.
c) The resolution procedures would achieve any of the objectives of the Law.
d) The resolution procedures would be a better alternative to dissolution of the SIFI.
2. For the purpose of implementing this Article, a crisis threatening the SIFI’s existence and ability to fulfil its obligations shall include:
a) Lack of financial and administrative resources necessary to ensure financial adequacy, cash flow, risk management, or the management of the institution, and achieve the standing obligations under the license that, if not available, would justify its revocation.
b) The value of assets falls below the value of liabilities or is likely to fall in the near future.
c) Inability or expected inability to settle its debts upon maturity.
d) Need for exceptional government support.
Article 11
1. The SIFI shall notify the competent authority when it faces or expects to face a crisis.
2. Without prejudice to the support agreements between members of a financial group, the SIFI may not be granted support from any other member of its financial group if the SIFI is likely to face a crisis, except in the following cases:
a) The support received by the SIFI would prevent the crisis.
b) The support does not adversely affect the status of the supporting member or the financial group as a whole.
c) Obtaining the approval of the competent authority supervising the financial institution providing support.
d) The support provided to the financial institution is in the form of loans or loan guarantees, or assets to be used as collateral.
e) The decision to provide support is taken by the management of the institution providing support and the management of the SIFI receiving the support.
f) The support is provided in accordance with an agreement approved by voting shareholders of the institution providing support.
Article 12
1. Prior to deciding to impose resolution procedures on a SIFI, the competent authority shall conduct a preliminary assessment, either by itself or through an accredited valuer.
2. In the absence of any risk to the stability of the financial sector due to the SIFI experiencing a crisis, the competent authority may request the relevant agencies to initiate bankruptcy procedures.
3. If the competent authority decides to impose resolution procedures on the SIFI, it shall first assess the value of its assets and liabilities through an accredited valuer. If it is not possible to appoint a valuer within an appropriate time, the assessment shall be carried out by the competent authority.
4. The assessment referred to in paragraph (3) of this Article aims to:
a) ensure the existence of conditions for initiating the resolution procedures stipulated in Article 10 of this Law;
b) determine suitable resolution procedures;
c) identify capital instruments and debts to be reduced, terminated, or transformed for the amendment of rights; and
d) identify assets, liabilities, and capital instruments to be sold, and determine their value in case of sale of the SIFI or transitional entity.
5. The competent authority shall, in cooperation with the Saudi Authority for Accredited Valuers, issue rules for the assessments referred to in paragraphs (1) and (3) of this Article and Article 22(3) of this Law.
Article 13
1. The competent authority may take one or more of the following procedures on any SIFI and its holding company or a subsidiary financial institution upon the existence of all conditions referred to in Article 10 of this Law:
a) Sale of the SIFI.
b) Establishment of a transitional entity.
c) Separation of SIFI assets.
d) Amendment of rights of the SIFI.
2. The competent authority may take resolution measures on the holding company or a subsidiary financial institution which does not qualify for resolution in cases where this is necessary to complete the resolution of the SIFI.
Article 14
1. If the competent authority decides to take resolution procedures on a SIFI, it shall first prepare an action plan to be approved by the Governor of the Saudi Central Bank or the Board of the Capital Market Authority, as the case may be, prior to implementing the resolution plan.
2. With the exception of urgent cases, if there is a need for the amendment of the action plan referred to in paragraph (1) of this Article or part thereof, the competent authority must obtain the approval of the Governor of the Saudi Central Bank or the Board of the Capital Market Authority in accordance with the aforementioned paragraph.
3. The competent authority may include in the action plan, referred to in paragraph (1) of this Article, procedures other than those in the resolution plan if it deems that they are consistent with this Law and achieve its objectives.
Article 15
In carrying out resolution procedures, the competent authority shall observe the following principles:
1. The losses incurred by the SIFI under resolution shall be borne by its owners and then by its creditors, taking into account the order of priority of their legal and contractual debts.
2. Accord the creditors of the SIFI subject to resolution a fair treatment to ensure that they will not receive a value less than the value they would receive if the SIFI is dissolved at the start of resolution procedures.
3. Mitigate the potential negative impact arising from resolution procedures on other financial institutions within the financial group or sector.
4. Avoid unnecessary depreciation of assets and reduce the cost of resolution procedures, as possible.