3. Indirect Participant Registration
3.1 Application Letter
19. A bank wish to register itself as Indirect Participant must send application letter to SAMA along with following documents:
i) Appointment Letter from Chief Executive Officer (CEO) or equivalent of the Indirect Participant proposing the appointment of Settlement Agent;
ii) A letter from the Bank to SAMA explaining to why it is in the Bank’s interest to operate as Indirect Participant;
iii) Draft Service Level Agreement between Settlement Agent and the Bank wishing to register itself as Indirect Participant; and
iv) Current Year plus 3 year SAR Payment Instructions Volumes and Values forecast (Incoming and Outgoing) of the Indirect Participant.
20. Based on review of the application letter and documents / information stated in article 19, SAMA will approve Bank’s registration as indirect participant to the Bank. SAMA may require additional information or may apply additional criteria on a case-by-case basis.
21. SAMA may reject the request if SAMA is of the view that Bank does not satisfy the Saudi Arabian Riyal Interbank Express Indirect Participation Rules. SAMA can also reject the request if it is of the view that it would be best interest of Financial Sector for the Bank to be Participant.
3.2 Appointment of Settlement Agent
22. As a part of appointing Settlement Agent, Indirect Participant must ensure that:
i) the Settlement Agent is authorized to clear, settle and record transactions for Indirect Participants;
ii) the Settlement Agent has operational, technical, financial and organizational capacity to support the needs of the Indirect Participant;
iii) it has identified all material dependencies on its Settlement Agent and must satisfy itself on the arrangements Settlement Agent has in response to those dependencies;
iv) it has performed detailed risk assessment on the Settlement Agent; and
v) all arrangements are in place with Settlement Agent to satisfy Indirect Participant's own clearing liabilities such for e.g. Intraday and / or Overnight Liquidity Facilities.
3.3 Onboarding of Indirect Participant
23. As a part of its onboarding process, Settlement Agent should ensure that:
i) it has identify, assess and document the risk associated with its provision of Saudi Arabian Riyal Interbank Express clearing and settlement services to the Indirect Participant including the impact of its own additional capital requirement due to increase in risks.
ii) it has ability and capacity to clear Indirect Participant’s liabilities (whether prefunded or not) i.e. Settlement Agent must ensure that it maintain adequate liquidity with SAMA to ensure its and its indirect participant’s liabilities are cleared on a timely manner. It establishes and operates such controls, policies and arrangements as are necessary to ensure that it has appropriately mitigated to an acceptable level the risks associated with providing Saudi Arabian Riyal Interbank Express clearing and settlement services to its Indirect Participant.
iii) it has taken reasonable steps to ensure that the Indirect Participant to whom it will provide do not jeopardize the safety, integrity or reputation of the Saudi Arabian Riyal Interbank Express.
iv) it has performed detailed risk assessment on its portfolio of Indirect Participants once additional Indirect Participant will be on-boarded.
3.4 Service Level Agreement
24. Both parties ("Indirect Participants and Settlement Agents") must ensure that they have a legally enforceable service level agreement in place under jurisdiction of Kingdom of Saudi Arabia.
25. Scope of services, roles and Responsibilities of both parties must be clearly defined.
26. Effective and expiry dates of the agreement, mechanism of renewal and requirement of periodic review of the agreement must be clearly defined.
27. All key performance indicators and its related attributes such as (but not limited to) definitions, calculation methods, threshold levels, frequency of measurements, reporting mechanism etc. must be clearly defined.
28. All applicable Information Security and Business Continuity Requirements pertaining to both parties in case of Incidents and Disasters must be clearly documented.
29. Both parties must ensure that dispute resolution arrangements are clearly documented including details of the charges payable in case of error, back value etc.
30. Both parties shall establish a process regularly to monitor and document (at a minimum annually) the performance of each other against their contractual obligations in respect of the service level agreement.