Banks occasionally introduce new products or services in the course of their business. These same innovations, however, could cause unforeseen and undesirable results. Licensed banks must therefore make sure any risks posed by new products/services to the individual bank or the financial system as a whole is well controlled. Banks must also ensure that new products and/or services deliver the required level of fair treatment, honesty and financial inclusiveness and meet SAMA's strategic objective for financial consumer protection.

In light of the above, an operational risk management framework/guideline is necessary for the introduction of new products and services. The objectives of this framework/guideline is to promote sound risk management practices in managing and controlling new product/service risk by ensuring the appropriate assessment and mitigation of risk during new product/service development.

This Guideline seeks to enhance the transparency, efficiency and risk management processes of the regulated banks' new products/services approval process by-

• Providing banks with guidance on what constitutes a new product or service.
• Providing high level policy requirements for new product/service development.
• Highlighting the special case of new derivatives and Fintech products.
• Detailing the information required to be submitted for new products/service when notifying SAMA.

This Guideline sets out the applicable regulatory procedures and SAMA's expectations regarding the management and control of risk associated with the development of new financial products and services by the regulated banks. It is applicable to all licensed banks. This guideline does not apply to products/services where licensed banks are explicitly required through other regulations or the Banking Control Laws to seek SAMA's approval for certain type of banking products and/or services.

           For the purposes of this Guideline, a new product or service is one which has not previously been marketed or sold by the bank. This is a product/service that is being offered by the bank in the Kingdom of Saudi Arabia (KSA) for the first time and includes a product/service which has never been offered by the bank before in KSA, notwithstanding the fact that the product or service may have already been offered by the bank or its parent outside of KSA (in case of a foreign bank).

OR

An existing product or service that has undergone material/significant modifications to the product structure, characteristics and risk profile.

The Chief Risk Officer (CRO) (or other designated senior risk officer identified by the bank) and the Head of Compliance shall be responsible for determining whether a variation to an existing product or service constitutes a material/significant change for the purpose of the definition of new product or service. Changes to key terms related to payment and other significant rights and obligations of the counterparties/customers, the intended uses and target markets of the product, and the nature of assets underlying the product should be taken into consideration when determining whether a change/modification is deemed significant/material change.

For Shariah-compliant products and services, the CRO or identified officer shall consult the Shariah Committee in assessing whether the proposed variation which would result in a material/significant change would give rise to any Shariah issues.