1.1DEFINITIONS

A) Trading Security Portfolio-Domestic

All kinds of securities issued by economic entities inside the Kingdom of Saudi Arabia that are acquired by the bank for trading in order to realize capital gains from the appreciation of their value.

(Paragraph 101)

B) Investment Security Portfolio-Domestic

All kinds of securities issued by economic entities inside the Kingdom of Saudi Arabia that are acquired by the bank for long term investment.

(Paragraph 102)

C) Trading Security Portfolio-Foreign

All kinds of securities issued by economic entities outside Saudi Arabia that are acquired by the bank for negotiation to realize capital gains from the appreciation of their value.

(Paragraph 103)

D) Investment Security Portfolio-Foreign

All kinds of securities issued by economic entities outside Saudi Arabia that are acquired by the bank for long term investment.

(Paragraph 104)

E) Date of Acquisition

The date on which the rights and risks associated with title of securities have been transferred to the bank regardless of the method by which the title was transferred i.e. by telephone, telex or on the basis of a contract, etc.

(Paragraph 105)

F) Cost of Acquisition

The cost born by the bank for the acquisition of securities including cost already paid or accrued to others such as brokers' fees, etc.

(Paragraph 106)

G) Current Market Value

The value which sets the base for the negotiation of a given kind of security at a specific date between an interested buyer and seller. Current market value may be published by international money markets or defined by virtue of official reports which govern locally issued securities.

(Paragraph 107)

H) Realized Trading Profit and Investment Gain Realized trading profit is the increase in the sale value of securities (acquired by the bank for trading) over their book value, provided that the conditions of sale are fulfilled. Realized investment gain is the increase in the sale value of securities (acquired by the bank for investment) over their book value, provided that conditions of sale are fulfilled.

(Paragraph 108)

I) Realized Trading and Investment Losses

Realized trading loss is the decrease in the sale value of securities (acquired by the bank for trading) over their book value, provided that conditions of sale are fulfilled. Realized investment loss is the decrease in the sale value of securities (acquired by the bank for investment) over their book value, provided that conditions of sale are fulfilled.

(Paragraph 109)

J) Unrealized Gains/Losses

The difference between the current book value and market value of securities that are still possessed by the bank.

(Paragraph 110)

K) Book Value of Securities

The accounting value of securities in compliance with the requirements of this standard.

(Paragraph 111)

L) Notional Value of Limited Life Securities

The value which the issuer of the money instrument undertakes to pay at maturity.

(Paragraph 112)

1.2 SCOPE

A) This standard defines acceptable accounting methods for the measurement of financial transactions, events and conditions related to the ‘acquisition by commercial banks of securities issued by competent economic entities inside or outside Saudi Arabia both for trading or investment purposes.

(Paragraph 113)

B) This standard also defines the requirements of presentation and general disclosure of trading and investment securities issued by competent economic entities inside and outside the Kingdom in the general purpose financial statements.

(Paragraph 114)

1.3 TEXT

A) Securities Portfolio

A.1 The objective of securities possession must be defined prior to taking decision with respect to their acquisition. This objective must be stated in writing and approved by authorized responsibles.

(Paragraph 115)

A.2 Trading securities portfolio must contain securities acquired by the bank for trading purposes only.

(Paragraph 116)

A.3 No transfer shall be allowed from trading securities portfolio to investment portfolio and vice versa unless such transfer is justifiable and approved by the authorized responsibles.

(Paragraph 117)

A.4 Items of the domestic trading securities portfolio must be valued at cost on the date of acquisition.

(Paragraph 118)

A.5 Items of the international trading securities portfolio must be valued at cost at the date of acquisition. Their value must be translated into the local currency at the spot exchange rate dominating at that date.

(Paragraph 119)

A.6 Domestic securities trading portfolio must be valued at the market value as the date of the financial statements. Such valuation must cover the individual securities rather than the portfolio as a whole.

(Paragraph 120)

A.7 International trading securities portfolio must be valued at the market value as at the date of the financial statements. Such valuation must cover the individual securities rather than the portfolio as a whole. The amount is then translated into local currency at spot rates dominating at the date of the financial statements.

(Paragraph 121)

A.8 The cost of the trading securities portfolio recorded for subsequent financial periods shall be at the market value computed as at the date of the financial statements

(Paragraph 122)

A.9 Differences resulting from the revaluation are to be recorded in the profit and loss accounts as an item of major operations.

(Paragraph 123)

A.10 Profit or loss realized from trading in securities and revaluation differences must be included in the computation of income from major operations.

(Paragraph 124)

A.11 Transfer from the trading portfolio to the investment portfolio and vice versa shall be recorded at the lower of cost or market value as at the date of transfer

(Paragraph 125)

A.12 The trading portfolio as a whole must be disclosed as a separate caption in the statement of financial position.

(Paragraph 126)

A.13 The nature of the domestic and international security trading portfolios must be disclosed in the notes to the financial statements. Such disclosure must cover the following:

• major categories of securities in the portfolio
• cost of acquisition of the portfolio as a whole or its valuation in previous period
• The profits or losses resulting from revaluation

(Paragraph 127)

A.14 Yield realized by the bank by virtue of maintaining trading security portfolio (other than trading profit or loss or revaluation) must be recognized as an item of income from non-major operations.

(Paragraph 128)

A.15 In the event of short sale of securities, the amount received by the bank must be recorded as a liability of the bank until the money instrument is delivered to the buyer.

(Paragraph 129)

B) Investment Securities Portfolio

B.1 The Investment Securities Portfolio must contain securities acquired by the bank for investment purposes.

(Paragraph 130)

B.2 No transfer shall be allowed from investment securities portfolio to trading portfolio and vice versa unless such transfer is justifiable and approved by the authorized responsibles.

(Paragraph 131)

B.3 Items of the domestic investment securities portfolio must be valued at cost as at the date of acquisition.

(Paragraph 132)

B.4 Items of the international investment securities portfolio must be valued at cost as at the date of acquisition. Their value must be translated into the local currency at the spot exchange rate dominating at that date.

(Paragraph 133)

B.5 The difference between the cost of acquisition of a given limited life money market instrument (security) and its nominal value must be recorded as premium or discount.

(Paragraph 134)

B.6 Premium or discount must be amortized over the financial period from the date of security acquisition to the date of maturity. The accounting method adopted by the bank in the computation of amortization must be disclosed and consistently applied.

(Paragraph 135)

B.7 Temporary changes in the current market value of both domestic and international investment securities portfolio must be ignored. Items of the portfolio must continue to be valued at cost of acquisition after amortization of discounts or premiums, if mainly possessed for investment. However, in the event of major decline of a permanent nature in the market value of any security items, it must be revalued, and cost of this item will be adjusted accordingly. Reduction in the value of a security item will be accounted for in the computation of income from non-major operations.

(Paragraph 136)

B.8 Yield on investment, including amortization of premium or discount, must be recorded as income from major operations.

(Paragraph 137)

B.9 Gains and losses realized from the investment portfolio must be accounted for in the computation of income from non-major operations.

(Paragraph 138)

B.10 Transfer from the investment portfolio to the trading portfolio or vice versa must be recorded at the lower of cost or market value as at the date of the transfer provided the transfer is justifiable.

(Paragraph 139)

B.11 The investment portfolio must be disclosed as a separate caption in the statement of financial position.

(Paragraph 140)

B.12 The nature of the domestic and international investment security portfolio must be disclosed in the notes to the financial statements Such disclosure must cover the following:

• major categories of securities in the portfolio
• cost of acquisition of each category and the portfolio as a whole
• current market value of the portfolio as a whole.

In relation with major categories of securities in the portfolio, banks may consider the following categories :

1- By nature of securities i.e equity, fixed rate, quasi securities etc.

2- Currency denomination (i.e local currency, foreign currency).

3- Residency of issuers (domestic, international).

(Paragraph 141)

B.13 Transfers from the investment portfolio to the trading portfolio and vice versa and its justifications must be disclosed.

(Paragraph 142)

2.1 DEFINITIONS

A) Loan

Credit facilities extended to a borrower for commercial, industrial, real estate or other purposes, whether such facilities are provided on demand or for a limited period of time. Excluded from loans are the discount of commercial paper and lease financing contracts.

(Paragraph 201)

B) Amount of Loan

The amount of credit facilities which a borrower undertakes to repay to the bank on a specific date/s or on demand in the future.

(Paragraph 202)

C) Special Commission on Loans

Total yield on loans earned by the bank over the term of the loan in accordance with the provision of respective contract concluded between the bank and the borrower.

(Paragraph 203)

D) Special Commission Earned

Special commission income earned by the bank during the current financial period

(Paragraph 204)

E) Unearned Special Commission

Special commission which will be earned over the remaining term of the loan.

(Paragraph 205)

F) Special Commission Accrued

Special commission earned but not collected from the borrower as at the date of the financial position statement.

(Paragraph 206)

G) Loan Service Charges

Fees charged to the borrower against loan servicing by the bank in conformity with the contract or other arrangements between the borrower and the (lending) bank.

(Paragraph 207)

H) Charges for Fixing Special Commission Rate

Fees charged to the borrower against fixing by the bank of the special commission rate charged over the term of the loan.

(Paragraph 208)

I) Credit Extension Fees

Fees charged to the borrower against loan processing by the bank.

(Paragraph 209)

J) Charged Off Loan

The loan principal and special commission accrued which the bank's management does not expect to collect from the borrower.

(Paragraph 210)

K) Allowance for Loan Losses

Loan principal and/or special commission which the bank's management deems it doubtful of repayment on part of the borrowers.

(Paragraph 211)

L) Provision for Loan Losses

The amount of increase or decrease in the allowance for loan losses which the bank's management decides to charge to the current financial period in order to form a sufficient reserve for possible loan losses at a given rate.

(Paragraph 212)

M) Loan Restructuring

Adjustment of loan provisions with respect to term. special commission. or repayment conditions.

(Paragraph 213)

N) Short Term Loans

Loans which are due for repayment in the course of the fiscal year following the date of financial position statement.

(Paragraph 214)

O) Long Term Loans

Amount of loans which are due for repayment after one or more years of the date of the statement of financial position.

(Paragraph 215)

P) Installment Loans

Loans repaid at intervals as specified in the contract concluded between the bank and the borrower.

(Paragraph 216)

Q) Net Realizable Value of the Loan

The amount of loan discounted to date in accordance with special commission rate stipulated by the loan contract or, otherwise, in accordance with imputed rate of special commission.

(Paragraph 217)

R) Imputed Special Commission Rate

The special commission rate which is applied to discount the net realizable value that is paid to the borrower.

(Paragraph 218)

2.2 SCOPE OF THE STANDARD

A) This standard specifies acceptable accounting practices for the measurement of financial transactions, events and conditions associated with the extension by the bank of credit facilities to its customers, regardless of the purpose or conditions of these facilities, including check credit (overdraft) and credit card plan facilities.

(Paragraph 219)

B) This standard also defines the requirements of presentation and general disclosure of loans in the financial statements.

(Paragraph 220)

C) This standard does not cover the measurement of transactions, events and conditions associated with the discount of commercial paper or with lease financing contracts.

(Paragraph 221)

2.3 TEXT

A) Measurement of Financial Transactions. Events and Conditions:

A.1 The difference between the loan amount and its net realizable value at the date of extension to the borrower is recorded as unearned special commission at that date.

(Paragraph 222)

A.2 Special Commission cannot be recorded as an income in the bank's books unless it is earned. Special commission is earned over the term of loan. Such special commission must, therefore, be spread over the financial periods covered by the loan term according to the flat rate method. Special commission is considered to be as part of income from major operations.

(Paragraph 223)

A.3 The fixation of special commission rate fees charged to the borrower over the financial periods covered by the terms of loan must be recorded as part of the special commission earned by the bank over the term of loan.

(Paragraph 224)

A.4 Loan service charges and loan processing fees received by the bank from borrowers over the relevant financial periods shall be spread in a reasonable and consistent manner.

(Paragraph 225)

A.5 The bank's management must study and analyze outstanding loans and special commission at regular intervals in order to determine the borrowers' solvency.

(Paragraph 226)

A.6 Loan principal and past due special commission must be charged off and recorded directly in the current financial period's expenses when the bank's management realizes that the borrower is in default with respect to repayment of principal and accrued special commission. Allowance for possible loan losses must be recorded in income of the current financial period. Amounts charged to the period's expenses and amounts added to period's income as a result of loan charge offs must be recorded as part of income from major operations.

(Paragraph 227)

A.7 When there are indicators to the possibility of insolvency on part of the borrower with respect to the repayment of loan principal and/or special commission, the bank must estimate the amount which may not be probably repaid up to date taking into consideration the loan collateral, and charge this amount to the (current) financial period as a provision for loan losses and determine the accounting treatment of the special commission for coming period. This provision must be accounted for in the computation of income from major operations.

(Paragraph 228)

A.8 The bank's management must not consider the special commission earned on loans which will not be probably received as part of income.

(Paragraph 229)

A.9 Special commission on loans (and accrued special commission) that may not be repaid should be credited to special commission in suspense. This treatment should be made effective for the whole year in which the management decision is taken regardless of the date of such decision. This special commission in suspense is deducted from the total loan balances on the face of the balance sheet.

(Paragraph 230)

A.10 When a previously written off loan is collected the amount rebooked shall be recorded in the income for the period during which the amount was collected.

(Paragraph 231)

A.11 When the amount of loans for which a provision for loan loss was formed is rebooked, the collected amount must be recorded as repayment of loan principal and the balance, if any, must be recorded as accrued special commission.

(Paragraph 232)

A.12 In the event of the bank's restructuring of a given loan the difference between the net realizable value of the loan's principal and special commission accrued less any provisions before restructuring and the net realizable value of the loan principal and special commission accrued after restructuring must be calculated, and the amount is recorded either as a loss or special commission income to be spread over the financial periods covered by the remaining term of loan.

(Paragraph 233)

A.13 In the event that the bank acquires a real asset in repayment of loan's principal and/or special commission accrued, the value of said asset must be recorded at the lower of the net realizable value of the loan's principal and/or special commission accrued or the fair market value of the asset as at the date of acquisition.

(Paragraph 234)

B) Presentation and Disclosure

B.1 The total amount of loans must be presented as a separate caption in the statement of financial position less allowance for possible loan losses, special commission, commission in suspense and unearned charges which were previously added to the amount of loans.

(Paragraph 235)

B.2 Amounts of unearned fees collected from the borrower or added by the bank to the loan principal must be disclosed.

(Paragraph 236)

B.3 Allowance for loan losses must be disclosed as at the date of financial position statement. Changes in the allowance must be disclosed during the financial period, including loans written off and amounts received from previously written off loans or provided for.

(Paragraph 237)

B.4 The book value of assets acquired but not disposed of by the bank in payment for loans or associated special commission accrued must be disclosed as at the date of financial position statement.

(Paragraph 238)

B.5 The following must be disclosed in the financial statements:

1) Outstanding loan balances (real estate, agricultural, commercial, consumption….etc) as at the date of the statement of financial position classified as domestic and international loans on the one hand and loans to government agencies and to business enterprises on the other hand.

2) Delinquent loans classified as nonaccrual loans in compliance with policy of classification adopted by the reporting bank and the provision relating to these loans.

3) Total loan debit and credit balance to related parties with a clarification of the nature of such relationship.

4) Accounting policy adopted by the bank in the computation of earned special commission and other fees.

(Paragraph 239)

3.1 DEFINITIONS

A) Deposits

Deposits are the bank's liabilities to customers against fund deposited with the bank on call, time or savings basis.

(Paragraph 301)

B) Call Deposits

Amounts deposited by customers in accounts which entitle them to draw funds at any time through the drawing of checks.

(Paragraph 302)

C) Time Deposits

Amounts deposited by clients in accounts which clients cannot draw from until after a certain date. This includes certificates of deposits and savings accounts (pass book).

(Paragraph 303)

D) Saving Accounts

Funds deposited in saving accounts which entitle customers to draw from them at any time.

(Paragraph 304)

E) Dormant Accounts

Call deposits and saving accounts which did not undergo any deposit or withdrawal transaction for a relatively long period of time.

(Paragraph 305)

3.2 SCOPE

A) This standard defines the methods of measurement of transactions, events and conditions associated with deposits of customers in commercial banks.

(Paragraph 306)

B) This standard also defines the requirements of presentation and disclosure with respect to deposit accounts.

(Paragraph 307)

3.3 TEXT

A) Deposits must be presented as a separate caption under liabilities in the reporting bank's statement of financial position. Deposits should be reported in their net realizable value as at the date of the statement of financial position. Net realizable value of deposits consist of funds deposited by customers plus special commission accrued on these deposits.

(Paragraph 308)

B) Special commission accrued on deposits must be charged to the expenses of the respective financial period Special commission accrued during the period is included in the computation of income from major operations.

(Paragraph 309)

C) Fees collected by the bank from depositors or charged to their accounts against services rendered by the bank must be considered as income of the periods during which those services were rendered.

(Paragraph 310)

D) Balances of both special commission and non-special commission generating deposits must be disclosed.

(Paragraph 311)

E) Deposit balances must be disclosed under the following three categories: Call deposit. Saving Accounts and Time Deposits.

(Paragraph 312)

F) Deposit balance from the public sector must be disclosed according to their respective categories.

(Paragraph 313)

G) Total balance of foreign deposits must be classified according to their respective categories as foreign currency if other than the Saudi Riyal.

(Paragraph 314)

H) Total special commission accrued on deposits for the respective financial period must be disclosed.

(Paragraph 315)

I) Deposit balances of other domestic and international banks must be disclosed according to their respective categories.

(Paragraph 316)

j) Total deposits with favorable conditions that are different than the general conditions applicable to the bank should be disclosed. Such disclosure should provide a general description of those conditions.

(Paragraph 317)

4.1 DEFINITIONS

A) Accounting changes are divided into the following:

• Change in accounting policy
• Change in accounting estimates
• Change in the structure of the accounting entity

(Paragraph 401)

B) Change in accounting policy means changing the accounting method applied in the treatment of financial transactions, events and conditions and their presentation in the financial statements i.e. change from a commonly used practice to an alternative acceptable practice.

(Paragraph 402)

C) Change in accounting estimates deals with events or conditions which make it imperative for the accounting entity to adjust previous accounting estimates due to the fact that such events or conditions were unknown at the time said estimates were made.

(Paragraph 403)

D) Change in the structure of the accounting entity is concerned with the increase or decrease in the number of accounting entities as reflected in the bank's financial statements which are not resulting from the purchase or sale of such accounting entities.

(Paragraph 404)

E) "Errors" refer to those errors which took place as a result of an unacceptable accounting practice, computation error, or wrong application of an acceptable accounting practice.

(Paragraph 405)

4.2 SCOPE

A) This standard defines the method of handling changes in accounting methods and correction of errors.

(Paragraph 406)

B) This standard also defines the requirements of presentation and general disclosure of accounting changes and correction of errors.

(Paragraph 407)

4.3TEXT

A) Change in Accounting Policy

A.1 In the event of change in an accounting policy, the newly adopted accounting policy should be applied with retroactive effect to financial statements for all financial periods already covered, unless certain circumstances exist which render it impossible to determine the detailed financial data necessary for the reasonable adjustment of prior year financial statements.

(Paragraph 408)

A.2 When a given accounting policy is applied with retroactive effect, all prior period financial statement figures must be adjusted for comparative purposes and to reflect the effect of the new accounting policy on respective periods unless there are circumstances which render it impossible to determine the effect of the new accounting policy on certain prior periods in a reasonable manner. Where such circumstances exist, the beginning balance of retained earnings for the current period or any prior periods must be adjusted (reconciled) as appropriate in order to reflect the cumulative effect of change in accounting policies on prior financial periods.

(Paragraph 409)

A.3 For each change in accounting policy which takes place during the current accounting periods the following information must be disclosed:

• Description of change
• Justification of change
• Effect of change on the current period financial statements.

(Paragraph 410)

A.4 If change in an accounting policy is applied with retroactive effect and prior period financial statements are adjusted accordingly, such adjustment and the effect of change in accounting policy on those periods must be disclosed.

(Paragraph 411)

A.5 However, if change in accounting policy is applied with retroactive effect without adjustment of prior period financial statements, this fact must be disclosed. The cumulative effect of adjustment on the beginning balance of retained earnings in the adjusted financial statements must also be disclosed.

(Paragraph 412)

A.6 Disclosure requirements with respect to the details of the effect of change in accounting policy, including Riyal value of such effect, apply to each change in accounting policy separately.

No clearance shall be allowed between the effect of various changes. The net value of such changes will be sufficient for the evaluation of the materiality of the effect of changes in accounting policies in order to determine if they must be disclosed or not.

(Paragraph 413)

A.7 The effect of change in accounting policy must be disclosed even if the effect of such change is not material in the current financial period but change is expected to be material in future financial periods.

(Paragraph 414)

B) Changes in Accounting Estimates

B.1 The effect of change in any given accounting estimate must be reflect in:

• The financial period during which the change takes place - if such change is restricted to the results of this period solely.

  (Paragraph 415)

• The financial period during which the change takes place and future financial periods if such change affects the results of both the current and subsequent financial periods.

(Paragraph 416)

B.2 The nature of change and its effect on net income before extraordinary gains or losses must be disclosed in the notes attached to the financial statements. Also the effect of such change on net income for the current financial period, with respect to infrequent or extraordinary changes in accounting estimates or changes which affect current and future financial periods (e g. changes in the estimated useful life of fixed assets) must be disclosed.

(Paragraph 417)

B.3 It is not necessary to disclose changes in estimates which take place in each financial period when accounting for ordinary activities of the accounting entity, e.g. estimate of the "allowance for loan losses".

(Paragraph 418)

C) Change in the structure of the Accounting Entity

C.1 Accounting changes which lead to the preparation of financial statements which actually represent financial statements of a new accounting entity must be disclosed. This is done through restating the financial statements for all financial periods covered in order to present the financial information of the new accounting entity for all the presented periods.

(Paragraph 419)

C.2 The nature and reason for change in the structure of the accounting entity which takes place in the current period must be disclosed in the notes to the financial statements covering this period.

(Paragraph 420)

C.3 The effect of change on income before extraordinary gains and losses and on net income for all periods whose results are presented must be disclosed in the notes to the financial statements. However, such disclosure is not necessary in the financial statement of subsequent periods.

(Paragraph 421)

D) Correction of Errors in Prior Period Financial Statements

D.1 Correction which takes place in the current financial period of an error which occurred in a prior period financial statement must be accounted for with retroactive effect. Affected comparative financial statements of prior periods must, therefore, be adjusted accordingly.

(Paragraph 422)

D.2 In the event of a correction of error in a given prior period financial statement, disclosure must be made in the notes to the financial statements with respect to:

• Description of the error
• Effect of error correction on the current and prior period financial statements
• Adjustment of prior period financial statements affected by that error.

(Paragraph 423)

DEFINITIONS

Local Currency

Currency which forms the major means for the exchange of goods and services in the country of domicile of the reporting accounting entity.

(Paragraph 501)

Financial Statement Currency

The currency used as a base for the preparation of financial statements which is mostly the local currency in the country of domicile of the reporting entity. In the case of Saudi Arabia the Saudi Riyal is the currency used in the preparation of financial statements.

(Paragraph 502)

Foreign Currency

Currencies, other than the local currency, that are used by the reporting entity in certain transactions.

(Paragraph 503)

spot Purchase or Sale of Currency

A contract between the bank and another party (correspondents) for the sale/purchase of foreign exchange at current market prices ruling at the date of dealing whether the transaction was concluded in local currency or any other foreign currency.

(Paragraph 504)

Forward (Futures) Purchase/Sale of Currency

A contract between the bank and another party (correspondent) for the sale/purchase of certain currency at a specific exchange rate in the future.

(Paragraph 505)

Translation of Financial Statements

A procedure by which financial statements prepared in a foreign currency for a given foreign office or subsidiary are translated into the local currency (e.g. SR) in order to prepare the consolidated financial statements of reporting bank.

(Paragraph 506)

Cumulative Effect of the Translation of Financial Statements

Cumulative differences resulting from the translation of financial statements of foreign offices or subsidiaries of the reporting bank which

are prepared in a currency other than the Saudi Riyal.

(Paragraph 507)

H)Revaluation of foreign currency transaction balances into the currency of financial statements Transaction balances stated in foreign currencies are those which require for their clearance the payment or receipt of a currency other than that in which the financial statements of the reporting bank is stated.

(Paragraph 508)

I)Foreign Exchange Gains (Losses)

Transaction balances stated in foreign currencies at the date of transaction are revalued in the currency used in the financial statements at spot exchange rates Riling at that date. Exchange gains (losses) resulting from the revaluation of transaction balances stated in foreign currencies are generated when such transaction results in monetary assets or liabilities which were not cleared in foreign currency until a date subsequent to that of the date of transaction. These gains (losses) are generated from change in the foreign currency spot rate between the date of transaction recording and the date of clearance of monetary assets or liabilities therefrom.

(Paragraph 509)

J)Forward Exchange Rate

The rate of exchange of two currencies provided that one of them is delivered at a specific subsequent date.

(Paragraph 510)

K)Spot Exchange Rate

The rate of exchange of two currencies whereby one of them is delivered immediately in exchange for the other.

(Paragraph 511)

5.2SCOPE

This standard defines the following:

Accounting for transaction balances recorded in foreign currencies.

(Paragraph 512)

Accounting for forward contracts for the purchase/ sale of foreign currency.

(Paragraph 513)

Method of accounting for the translation of foreign office and subsidiary financial statements which are prepared in foreign currency.

(Paragraph 514)

Presentation and disclosure requirements related to the above matters.

(Paragraph 515)

TEXT

Transaction Balance in Foreign Currency

A.1Transaction balances stated in foreign currencies at the date of transaction must be recorded in the currency of the financial statements at the ruling spot exchange rates.

(Paragraph 516)

A.2If foreign currency transaction balances result in monetary assets or liabilities stated in foreign currencies and were still uncleared at the date of the statement of financial position, these assets or liabilities must be restated in the currency of the financial statements at the ruling spot rate of exchange. Gains (losses) resulting from the difference in the spot rate of exchange at the date of transaction and the date of the statement of financial position, will be recorded as income from major operations.

(Paragraph 517)

A.3Gains or losses resulting from variation in the exchange rates of foreign currencies associated with clearance of monetary assets or liabilities stated in foreign currency at spot rates which are different from rates at which they were recorded in the books of account must be recorded as income from major operations for the financial period during which the clearance takes place.

(Paragraph 518)

B)Future Contracts

B.lDiscount (premium) associated with futures contracts for financial periods covered by the term of contract must be reasonably amortized. The amount amortized must be recorded as income from major operations.

(Paragraph 519)

B.2Gain or loss from futures contracts must be computed by multiplying the amount of foreign currency involved in the contract by the amount of the difference between the spot rate of exchange Riling at the date of the financial position statement and the dominating spot exchange rate ruling at the date of contracting (or the spot rate of exchange used in the computation of gain or loss realized from the contract during the prior financial period) Such gain or loss must be recorded as income from major operations.

(Paragraph 520)

Translation of Financial Statements Prepared in Foreign Currency

C.1 The spot rate of exchange ruling at the date of financial statements must be applied in the revaluation in the local currency (SR) of foreign branch and subsidiary owned assets and liabilities stated in foreign currencies.

(Paragraph 521)

C.2 The weighted average of foreign currency spot exchange rate over the respective financial period must be applied in the revaluation (in Saudi Riyal) of revenues, expenses, gains and losses of the bank's foreign offices and subsidiaries which prepare their financial statement in foreign currencies.

(Paragraph 522)

C.3 Exchange difference resulting from the translation of financial statements prepared in foreign currencies must not be recorded in income. The accumulated balance of such exchange difference must be presented as a separate caption with the equity capital group.

(Paragraph 523)

C.4 If the bank sells or liquidates its investment in a given foreign branch or subsidiary, the amount of such investment must be written down from cumulative exchange difference and recorded in the gain or loss from the sale or liquidation of investment during the period in which the sale or liquidation has taken place.

(Paragraph 524)

Presentation and Disclosure

D.1 Total gains or losses from foreign currency exchange difference recorded in income during the financial period must be disclosed in the profit and loss statement.

(Paragraph 525)

D.2 Foreign currency futures contracts outstanding as at the date of the statement of financial position must be disclosed as follows:

Type of currency

Spot rate Riling at the date of the statement of financial position

The quoted forward price

The date of maturity

(Paragraph 526)

D.3 The method applied by the bank in amortizing the discount (premium) of currency futures contracts must be disclosed.

(Paragraph 527)

D.4Changes during the financial period with respect to accumulated adjustments resulting from the translation of financial statements must be disclosed.

(Paragraph 528)

6.1 DEFINITIONS

A) Bank Premises

This item covers the bank's buildings and land occupied by the Bank's operations or used to accommodate or recreate the bank's personnel.

(Paragraph 601)

B)Furniture. Fixtures and Equipment

This covers all other fixed assets used by the bank in running its operations other than premises and land.

(Paragraph 602)

C) Fixed Assets

Tins covers all the bank's premises, furniture, fixtures and equipment as defined in the above two paragraphs.

(Paragraph 603)

D) Other Real Estate

This item covers real estate (buildings and land) acquired by the bank in payment for debts due to the bank or any other real estate not being used that are not for any of the business purposes stated in Article 12. clause 5 of the Banking Control Law . Other real estate is not considered as part of fixed assets.

(Paragraph 604)

E) Depreciation

The cost of fixed asset acquisition spread over the financial periods which represent the estimated useful life of the asset.

(Paragraph 605)

F) Book Value

The difference between the acquisition cost of the fixed asset and cumulative depreciation at a certain period of time.

(Paragraph 606)

6.2 SCOPE

A) This standard defines accounting methods applied in the measurement of transactions, events and conditions associated with the acquisition by the bank of fixed assets and other real estate.

(Paragraph 607)

B)This standard also defines the presentation and disclosure requirements with respect to fixed assets and other real estate.

(Paragraph 608)

6.3 TEXT

A) Measurement of Transactions, Events and Conditions

A.1 Fixed assets acquired by the bank for the purpose of running its own business (premises, furniture, fixtures and equipment) must be recognized at cost as at the date of acquisition.

(Paragraph 609)

A.2 The cost of acquisition must include direct capital expenses needed to furnish the fixed asset to be used in running the bank's business.

(Paragraph 610)

A.3 The cost of acquisition by the bank of premises, furniture, furnishings and equipment to be used by the bank for running its business must be reasonably spread over the financial periods which represent the estimated useful life of the asset. These assets may be depreciated in accordance with any generally acceptable method of depreciation, provided that the same method is applied consistently over the whole financial periods unless change of the selected method is strongly justified.

(Paragraph 611)

A.4 When the bank disposes of a fixed asset that has been acquired by the bank for the purpose of running its own business, the financial period during which the asset was disposed of will be charged with the difference between the books value and the salvage value of the said asset. This difference is recorded as gain or loss from non-major operations.

(Paragraph 612)

A.5 Other real estate acquired by the bank in payment of due loans or any other real estate not in use must be recorded at the lower of the fair market value of due loans (including special commission accrued). Upon sale of this real estate the difference between its book value and sale price is recorded as gain or loss from major operations for the financial period during which the sale was concluded.

(Paragraph 613)

A.6 The bank's management must conduct periodic revaluation of other real estate in order to subordinate if their recorded book value is not possible to realize in full, in which case the difference between the book value and net realizable value must be recorded as loss from major operations. Increase in the value of other real estate cannot be recognized until such increase is realized through sale.

(Paragraph 614)

B) Presentation and Disclosure

B.1 Fixed assets acquired by the bank for the purpose of running its own business must be presented as a separate caption in the statement of financial position. Fixed assets of this sort must be calculated at cost of acquisition less accumulated depreciation.

(Paragraph 615)

B.2 Other real estate must be presented as a separate caption in the statement of financial position.

(Paragraph 616)

B.3 The following must also be disclosed:

1) Amount of depreciation for the respective financial period:

2) Gains or losses realized from the disposal of fixed assets owned by the bank for the purpose of running its own business;

3) Items or parts of fixed assets of material value and significant changes which take place during the financial period.

4) Changes in accumulated depreciation during the financial period;

5) Material changes in other real estate during the financial periods;

6) Losses incurred by the bank as a result of assignment of past due loan in lieu of acquiring other real estate during the financial period; and

7) Gains or losses from the sale of other real estate or revaluation gain or losses during the financial period.

(Paragraph 617)

7.1 DEFINITIONS

A) A parent company is an enterprise that has one or more subsidiaries.

(Paragraph 701)

B) A subsidiary is an enterprise that is controlled by another enterprise known as the parent.

(Paragraph 702)

C) A group is a parent and all its subsidiaries.

(Paragraph 703)

D) Affiliated company is an enterprise that is 50% or less owned by another enterprise and accordingly is not controlled by that enterprise.

(Paragraph 704)

E) Control is the power of the parent to govern the financial and operating policies of an enterprise that it invests in. Control is presumed to exist when the parent owns more than a half of the voting power of an enterprise or empowered to elect the majority of the board of directors.

(Paragraph 705)

F) Significant influence is participation in the financial and operating policy decisions of the invested but not control of those policies. An investor may exercise significant influence in several ways, usually by representation on the board of directors or by participating in policy making processes, material intercompany transactions, interacted of managerial personnel, or dependency on technical information. If the investor holds less than 20% of the voting power of the invested, it should be presumed that the investor docs not have the power to exercise significant influence.

(Paragraph 706)

G) Consolidated financial statements are statements which present the assets, liabilities, shareholders accounts, revenue and expenses of a parent company and its subsidiaries as those of a single enterprise.

(Paragraph 707)

H) Minority interest is that part of the net results of operations, or of net assets, of a subsidiary attributable to shares owned other than by the parent or another subsidiary.

(Paragraph 708)

I) Equity method is a method of accounting for investments in subsidiaries or affiliated companies wherein such investment account of the investor is stated at cost and adjusted for the changes in the investor's share of net assets of the invest that occur after the date of acquisition.

(Paragraph 709)

J) Consolidating the financial statements is the process of combining the accounts of the parent company and its subsidiaries on a line by line basis by adding together like items of assets, liabilities, revenue and expenses and eliminating intercompany balances and transactions.

(Paragraph 710)

K) Proportionate consolidation is a method of financial statement reporting whereby the investor's pro-rata share of the assets, liabilities, income and expenses of a joint venture is combined with similar items on a line by line basis and eliminating intercompany balances and transactions.

(Paragraph 711)

7.2SCOPE

A) Introduction

Bank sometimes invests in established companies or newly formed ones The objectives of these investments are long term investment and usually the bank is represented on the board of directors of the investee company The bank's shareholders, users of the bank's financial statements and other parties are concerned with the fortunes of the entire group and not limited to the bank's affairs as a single legal entity. Accordingly, they need to be informed about the financial position and results of operations for the group as whole. This need is served by consolidated financial statements, which present financial information concerning the group as that of a single enterprise without regard for the legal boundaries of the separate legal entities.

(Paragraph 712)

A.1 This standard deals with the following:

• Accounting for investments in affiliated, joint venture and subsidiary companies in the banks own separate financial statements which are legally required to be issued.
• The preparation of consolidated financial statements of the bank, its joint venture company and subsidiaries.

(Paragraph 713)

A.2 Following are the different possibilities for investments:

1) The bank owns less than 20% of the equity of the investee -- it is presumed that the bank does not exercise significant influence accordingly.

• The invested is considered an affiliate
• The value of the investment is reflected in the bank's own financial statements at cost.
• The cost of the investment is adjusted to reflect any reduction in the equity of the affiliate that are other than temporary.
• The accounts of the affiliates are not consolidated with the banks own financial statements.

(Paragraph 714)

2) The bank owns 20% to 50% of the equity of the investee -- it is presumed that the bank exercises significant influence on the invested and accordingly account for such an investment in affiliate follows the equity method unless there are indications that the bank does not exercise significant influence. The accounts of the such affiliates are not consolidated with the banks own financial statements.

(Paragraph 715)

3) The bank owns 5 1% or more of the equity of the investee -- it is presumed that the bank controls the investee and accordingly the investee is considered the banks subsidiary. The investment in the subsidiary is reflected in the bank's own separate financial statements should be accounted for by the equity method Also the financial statements of the subsidiary should be consolidated with those of the bank to reflect the total of the assets and liabilities controlled by the bank directly or indirectly or by the bank's voting right.

(Paragraph 716)

4) The bank owns a certain percentage in a joint venture with one or more partner -- the ownership of a percentage of the equity in a joint venture by the bank gives the bank joint ownership of the net asset and control of the joint venture. Accordingly, the investment in such joint ventures is to be accounted following the equity method The financial statements of the joint venture is consolidated with the bank's own financial statements on the basis of proportionate consolidation.

(Paragraph 717)

B) The Standard

This standard deals with:

B.1 The preparation and presentation of consolidated financial statements for a group of enterprises under the control of a parent These statements are prepared to meet the need for information concerning the financial position and results of operations of the parent company , its subsidiaries and joint ventures as those of a single enterprise.

(Paragraph 718)

B.2 Accounting for investment in subsidiaries in the bank company own separate financial statements.

(Paragraph 719)

B.3 Accounting for the investment in affiliates in the bank's own separate financial statements.

(Paragraph 720)

7.3 TEXT

A) A bank investing in a subsidiary must issue, in addition to its own separate financial statements, a set of consolidated financial statements for the bank and its subsidiary.

(Paragraph 721)

B) When issuing consolidated financial statements all local and foreign subsidiaries must be consolidated expect in the following circumstances:

B.1 Control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future for a specific benefit.

B.2 The subsidiary operates under severe restrictions which significantly impair its ability to transfer funds or movement of its capital.

B.3 When the subsidiary's business activities are dissimilar from those of banking and finance companies.

In the above cases, the investment in the subsidiary is accounted for following the equity method and reflected at that value in the consolidated statements of the bank.

(Paragraph 722)

C) Method of consolidation.

C.1 Intergroup balances and intergroup transactions. including interest and dividends are eliminated in full.

(Paragraph 723)

C.2 Minority interest in the net asset of consolidated subsidiaries are calculated and presented in the consolidated balance sheet separately from liabilities and the bank's shareholders equity. Also, the minority interest in the net income of these subsidiaries should be presented as a separate line item on the consolidated statement of profit and loss.

(Paragraph 724)

D) When the bank issue its own separate financial statements (unconsolidated) which is required for legal purposes, the investments in subsidiaries should be accounted for as follows:

D.1 At cost adjusted to equal the bank's share in the subsidiary's equity.

D.2 The value is increased by the bank's share in the realized profits of the subsidiary after the date of acquisition.

D.3 The value is reduced by the bank's share in the realized losses of the subsidiary after the date of acquisition.

D.4 The value is reduced by the amount of dividends received by the bank from the subsidiary.

(Paragraph 725)

E) Investment in an affiliate representing less than 20% of the affiliates equity is accounted for at cost. The cost is adjusted for any reduction in the equity of the affiliate that is other than temporary.

(Paragraph 726)

F) Investment in an affiliate representing 20% to 50% of the affiliates equity is accounted for by the use of the equity method.

(Paragraph 727)

G) Disclosure in the consolidated financial statements is to be made regarding consolidated subsidiaries, including the name, country of incorporation and residence, proportion of ownership, legal states and nature of its business operations.

(Paragraph 728)

H) Disclosure should be made of subsidiaries not consolidated (as in <G> above) together with:

H.1 The reasons for not consolidating

H.2 The nature of the bank relation with these subsidiaries

(Paragraph 729)

I) Disclosure should be made in the bank's own separate financial statement (unconsolidated) of the accounting method being followed for accounting for subsidiaries, affiliates and joint venture.

(Paragraph 730)

8.1 INTRODUCTION

A) This standard is applicable to published financial statements of commercial banks operating in Saudi Arabia.

(Paragraph 801)

B) Financial statement objectives, accounting concepts and standards of presentation and general disclosure for business enterprises that was issued by the Minister of Commerce resolution No. 692 dated 28-12-1406 are applicable to commercial banks unless this standard clearly states otherwise

(Paragraph 802)

C) This standard is divided into two main parts as follows:

1st Part: General Presentation in the financial statements of commercial banks

2nd Part: General disclosure in the financial statements of commercial banks.

(Paragraph 803)

D) This standard covers the following three terms which refer to varying levels of classification with regard to presentation in the financial statements:

a) ITEM -- This represents the lowest possible level of detail for the preparation of assets, liabilities, income, expenses, gains and losses. Each such item is assigned a separate line in the appropriate financial statement.

b) CAPTION -- This covers a number of items that are presented together. A caption represents an intermediate level of grouping for purposes of presenting various assets, liabilities, income, expenses, gains and losses. Each caption will be assigned a separate line in the appropriate financial statement.

c) GROUP - It covers a number of captions that are presented together. A group represents the highest possible level of grouping for the purpose of presenting various assets, liabilities, income, expense, gains and losses. Each group will be assigned a separate line in the appropriate financial statement.

(Paragraph 804)

8.2 SCOPE

A) This standard defines the requirements of general presentation and disclosure in commercial bank general purpose financial statements.

(Paragraph 805)

B) This standard deals with certain considerations related to the level of materiality which defines items, captions and groups as well as respective notes that must be separately presented in the financial statements and those which must be combined with other items, captions, or groups. These considerations do not apply to the other issues that are handled by the standard of general presentation and disclosure for commercial banks.

(Paragraph 806)

C) It should be noted that the previous commercial bank standards are also provided for presentation and disclosure requirements which deal with the respective subjects of those standards.

(Paragraph 807)

8.3 TEXT

A) General Presentation

This section defines the general requirements for the presentation of information in the financial statements generally and severally.

A.1 General Requirements:

1.1 The Integrated Group of Financial Statements:

• An integrated Group of Financial statements consists of the following:

    -Statement of financial position

    -Statement of Income

    -Statement of Changes in Stockholder's Equity

These statements and related notes represent the minimum requirements for the preparation and presentation of commercial bank financial statements.

(Paragraph 808)

1.2Arrangements of financial statements presentation: Financial statements must be presented in the following order:

• Statement of Financial Position
• Statement of Income
• Statement of Changes in Stockholders' Equity

Notes to financial statements must be presented immediately after the last statement and are considered to form an integral part of the financial statements.

(Paragraph 809)

1.3 Materiality Considerations:

An item, caption or group is considered to be of material value if its omission, non- presentation, failure to provide notes or wrong phrasing of those notes leads to misinterpretation of information presented in the financial statements or to deficiency of such financial information which will impact the feasibility of these statements to users. To determine the level of materiality of given item, caption or group for purposes of a presentation in the financial statements or attached notes, the nature and relative value of such item, caption or group must be taken into consideration. These two factors are usually evaluated altogether. However, either of these two factors may be the decisive factor in certain circumstances.

(Paragraph 810)

a) Nature of item, caption or Group:

In studying the nature of financial data to determine if it needs to be presented as an item, caption or group in the financial statements or attached notes, the following should be taken into consideration:

1) The basis for accounting measurement or recognition of the item, caption or group.

2) The degree of reliability in accounting measurement.

3) The item, caption or group's relationship/non-relationship with the bank's major operations.

4) Significance of the item, caption or group with respect to the decisions made by the users on the basis of information contained in the financial statements.

(Paragraph 811)

b) Relative Value:

To study the relative value of a given item, caption or group, it must be compared on a sound basis by employing the following principles:

1) Each item caption or group in the statement of income must be compared with net income for the current year or with the average net income for the past five years (including the current year), whichever is more appropriate for the measurement of net income, with due consideration to the trend of net results during the said period.

(Paragraph 812)

2) Each item, caption or group in the statement of financial position must be compared with' the total assets of the bank.

(Paragraph 813)

3)Contingent assets and liabilities are not to be considered part of the bank's total assets or liabilities.

(Paragraph 814)

1.4 General principles for the presentation of information in the financial statements:

a) The financial statements must be in a form which would allow a clear presentation of the bank's assets, liabilities, owners' equity and results of operations. Terminology must be used in a manner which would facilitate comprehension on part of the general user of information contained in the financial statements.

(Paragraph 815)

b) Items, captions and groups of no significance must be grouped together and classified according to type or relationship to the bank's major operations.

(Paragraph 816)

c) Amounts presented in the financial statements and attached notes should be rounded to the nearest thousand Saudi Riyal.

(Paragraph 817)

d) Financial statements of, at least, the prior financial period must be presented for comparison with those of the current period. Any change in form or contents of the financial statements and the corresponding notes must be disclosed.

(Paragraph 818)

e) Each statement must contain:

• Full name of the bank
• Legal status of the bank
• Date/s of the statement of financial position and period/s covered by other financial statements.

(Paragraph 819)

f) Notes must have distinctive titles and numbers. Note numbers must also be cross referenced with related captions in the respective financial statement. Each financial statement must be footnoted with the following statement: "The attached notes form an integral part of the financial statements".

(Paragraph 820)

g) Financial statements and attached notes must be properly numbered

(Paragraph 821)

h) Subtotals must be presented in a separate column in each statement.

(Paragraph 822)

A.2 General Presentation Requirements of Individual Financial Statements:

2.1 General

a) Commercial bank statements of financial position must contain all assets, liabilities and stockholders equity. These items must be prepared in a vertical and comparative manner. Assets must be balanced with liabilities plus stockholders' equity.

(Paragraph 823)

b) Each item, caption or group presented in the statement of financial position must provide for easy comparison with that of prior period. Comparative figures must be adjacent to current year's figures to facilitate comparison on part of the general user. Reference must also be made to any change in accounting policy between the current period and prior period.

(Paragraph 824)

c) Each item, caption or group in the statement of financial position must be described in an accurate and clear manner.

(Paragraph 825)

d) Items, captions or groups contained in the statement of financial position must be presented in the following order:

• Assets
• Liabilities
• Stockholders' equity

(Paragraph 826)

e) Assets and liabilities cannot be classified as current and noncurrent in the statement of financial position of a commercial bank. No offsetting shall also be allowed between assets and liabilities unless otherwise required by law, if any.

(Paragraph 827)

f) Debit and credit (contingent) memorandum accounts shall not be presented in the body of the statement of financial position.

(Paragraph 828)

2.2 Assets

a) Total bank assets must be presented in the body of the statement of financial position.

(Paragraph 829)

b) As a minimum, the following groups of assets must be individually presented in the body of the statement of financial position in the following order:

• Cash and balances with SAMA and other banks
• Securities portfolio
• Net loans
• Investment securities portfolio
• Net fixed assets (bank premises, furniture and fixtures)
• Other real estate
• Other assets

(Paragraph 830)

c) Deposits with SAMA must be disclosed as follows:

• Legal deposits
• Call deposits
• Other deposits

(Paragraph 831)

Deposits with other banks must bedisclosed as follows:

• Call deposits with other domestic banks
• Call deposits with foreign offices of other domestic banks
• Call deposits with foreign banks
• Time deposits with other domestic banks
• Time deposits with foreign offices of domestic banks
• Time deposits with foreign banks

(Paragraph 832)

e) Loans and special commission due must be disclosed in compliance with the requirements of the standard of loans.

(Paragraph 833)

f) Trading portfolio and investment securities portfolio must be disclosed in accordance with the requirements of the standard for trading and investment securities portfolio.

(Paragraph 834)

g) Fixed assets (bank premises, equipment and fixtures) and other real estate must be disclosed in compliance with the requirements of the standard of fixed assets and other real estate.

(Paragraph 835)

h) Other asset items or captions of material value must be disclosed.

(Paragraph 836)

2.3 Liabilities

a) As a minimum the following groups of liability items must be separately presented in the body of the statement of financial position in the following order:

• Deposits
• Other borrowed funds
• Other liabilities

(Paragraph 837)

b) Deposit (liabilities) must be disclosed in compliance with the standard of deposits.

(Paragraph 838)

c) Other borrowed funds must be disclosed as follows:

• Nature of the lending area
• Amount borrowed
• General conditions of credit

(Paragraph 839)

d) Liabilities secured by bank asset collateral must be disclosed.

(Paragraph 840)

e) Other liability items or captions of material value must be disclosed.

(Paragraph 841)

2.4 Stockholders' Equity

a) As a minimum, component items of stockholders' equity must be presented in the body of the statement of financial position in the following order:

• Paid up capital: This includes the owners' investment against their equity or the face value of shares issued by the bank and actually paid by owners or shareholders. Declared capital must also be disclosed.
• Statutory reserve in compliance with the provisions of the Companies Law or the Banking Control Law.
• Other reserves: This includes reserves other than statutory reserve, that are deducted from retained earnings and allocated to a specific purpose.
• Retained earnings.
• Accumulated exchange differences (if any) resulting from the translation of foreign currencies.

(Paragraph 842)

b) Total stockholders' equity must be presented in the body of the statement of financial position.

(Paragraph 843)

2.5 Memorandum Accounts

a) Memorandum (contingent) accounts are to be presented after total assets and total liability and stockholder's equity vertically in group totals. The amounts are to be show n in the middle of the statement of financial position in a singular column.

(Paragraph 844)

A.3 Presentation of Information in the Statement of Income

3.1 The bank's results of operations must be presented in a multi-staged statement which differentiates between net income from major operations and other income, gains and losses.

(Paragraph 845)

3.2 Comparative figures for a minimum of one prior financial period must be presented and effect of changes in accounting policy must be disclosed in compliance with relevant standard.

(Paragraph 846)

3.3 The following groups of items must be presented in the statement of income of the bank, if available, and in the following order:

a) Net income from major operations

b) Other gain (loss) / revenue (expense)

c) Net income before extraordinary items

d) Extraordinary items

e) Net income

(Paragraph 847)

3.4 Components of net income from major operations must be disclosed as follows:

• Special commission income on loans and other credit facilities
• Gain (loss) from exchange
• Gain (loss) on trading portfolio
• Return on investment portfolio
• Gain (loss) on other real estate
• Fees and income from services
• Special commission expense
• Allowance for loan loss (including loans written off or written back)
• General and administrative expenses

(Paragraph 848)

3.5 Items or captions of material value from other gain (loss) revenue (expense) must be disclosed. The following items form part of this group.

• Gain (loss) on investment portfolio
• Gain (loss) on sale of fixed assets
• Return on trading portfolio

(Paragraph 849)

3.6 Components of extraordinary items of material value must be disclosed.

(Paragraph 850)

3.7 Zakat and tax must be disclosed separately as detailed in paragraphs 859 to 862).

(Paragraph 851)

A.4 Presentation of Information in the Statement of Changes in Stockholders' Equity

4.1 A statement of changes in stockholders' equity must be prepared for each financial period which call for the preparation of a statement of income. It must also reflect changes in stockholders' equity during the same financial period.

(Paragraph 852)

4.2 Statement of changes in stockholders' equity must be prepared in a vertical, classified and comparative format It must also cover a minimum of two financial periods including the current financial period.

(Paragraph 853)

4.3 Statement of changes in stockholders' equity must consist of the following

components:

• Beginning balance of paid up capital
• Beginning balance of reserves
• Beginning balance of retained earnings
• Changes in paid up capital during the period
• Adjustments of reserves during the period
• Net income during the period
• Dividends
• Other changes in retained earnings during the period.
• Closing balance of paid up capital
• Closing balance of reserves
• Closing balance of retained earnings

(Paragraph 854)

4.4 Any change in the components of shareholders' equity must be explained in a manner which will facilitate its comprehension by users.

(Paragraph 855)

4.5 Change in accumulated differences (if any) resulting from the translation of financial statements must be presented as an item in the statement of changes in stockholders' equity .

(Paragraph 856)

B) GENERAL DISCLOSURE

B.1 Commercial banks must comply with the following requirements of disclosure:

1.1 General Information on the Bank

Notes to the financial statements must contain general information on the bank covering:

• Legal form, articles and memorandum of association and licence.
• Saudi and non-Saudi percentage of ownership in joint venture banks.
• Geographical distribution of bank's activities.
• Brief description of major services supplied by the bank.

(Paragraph 857)

1.2 Extraordinary Supervisory Control Imposed on the Bank

Disclosure must be made in the financial statements of extraordinary supervisory controls imposed on the bank by regulatory authorities which limited the authority of the bank's management of its funds pending the approval of those regulatory authorities. Such disclosure must cover the following:

    a) Date, validity and nature of controls

    b) Type of decisions affected by those controls.

(Paragraph 858)

C) Zakat and Income Tax Disclosure

Disclosure in a separate note should be made of the following:

C.1 Zakat due for the current period and the accounting treatment of its recording and reduction from dividends payable.

(Paragraph 859)

C.2 If the bank realizes a loss for the period, the zakat due for the current period together with its related accounting treatment.

(Paragraph 860)

C.3 The zakat paid on previous years in which the bank realized losses and which was not recovered from the Saudi shareholders, its future liquidation and in which asset caption it is included in the financial position statement.

(Paragraph 861)

C 4 Amounts of income tax payable (in mixed banks) on the results of operations of the current period and the related accounting treatment for its deduction from the dividends payable to the foreign shareholder.

(Paragraph 862)

Synopsis

This section describes the minimum requirements, procedures and standards for Cash in Transit (CIT)operations for all banks.

Synopsis

This section describes the minimum requirements and standards for Security Guards operating through out the banks Main Buildings and Branches.

The Council of Ministers,

   Having reviewed Royal Order No. A/112 dated 28-6-1414 H, and

   Having reviewed the file sent by the Council of Ministers Presidency Bureau No. 98/8 dated 1-3-1412H, containing the cable of HRH the Foreign Minister No. 96/32/501/4845/1 dated 18-2-1412 H, referred to in the minutes of the Committee formed by Royal Order No. 5/1820 dated 3-2-1411 H, to study the membership of the Kingdom in the International Convention for the Protection of Literary and Artistic Works of 1952, amended in Paris on 24 July, 1971 A.D and sponsored by UNESCO, and

   Having reviewed the memorandum of the Experts Committee of the Council of Ministers No. 114 dated 7-11-1412 H, and

   Having reviewed the recommendation of the General Committee of the Council of Ministers No. 17 dated 11-1-1413 H, and

   Having reviewed the minutes of the Experts Committee meeting No. 5 dated 15-6-1414 H, and

   Having reviewed the recommendation of the General Committee at the Council of Ministers No. 150, dated 5-7-1414 H, and

   Having studied the International Convention For The Protection of Literary and Artistic Works, as amended in Paris on July 24, 1971 A.D, which stated in paragraph (3) of Article (9) that:

    "A State which is not a party to the 1952 Convention shall be considered a party to that Convention if it joins the Paris Convention. However, this State may, if it presents its membership credentials before the present Convention goes into effect, suspend its membership until this Convention goes into effect, after which date no State may become a member of the 1952 Convention alone." And

   After studying the 1952 Convention at the Council of Ministers,

Decides:

    To approve the Kingdom's membership in the International Agreement For The Protection of Literary and Artistic Works, amended in Paris on 24 July, 1971 A.D.

    A draft Royal Decree has been prepared in this respect (copy attached).

Signed

President of the Council of Ministers

M/12

Dated: 16-7-1414 H

   With the Help of God,

   We King Fahd bin Abdul Aziz Al Saud, King of the Kingdom of Saudi Arabia,

   Having reviewed article 70 of the Constitutional Regulation issued by Royal Order No. A/90 dated 27-8-1412 H, and

   Pursuant to Royal Order No. A/112 dated 28-6-1414 H, and

   Pursuant to article 20 of the Councils of Ministers Regulations issued by Royal Order No. A/13 dated 3-3-1414 H, and

   Having reviewed the International Convention For The Protection of Literary and Artistic Works, as amended in Paris on 24 July, 1971 A.D, and

   Having reviewed the 1952 International Convention For The Protection of Literary and Artistic Works, and

   Pursuant to the Council of Ministers Decision No. 7 dated 14-7-1414 H.

Decree as follows:

1. To approve the membership of the Kingdom of Saudi Arabia in the International Convention For The Protection of Literary and Artistic Works, as amended in Paris on 24 July, 1971 A.D, in its attached version.

2. HRH the Vice President of the Council of Ministers and the Ministers shall implement this Decree of ours, each in his own capacity.

Signed

King Fahd Bin Abdul Aziz Al Saud

of September 9, 1886 A.D, completed at PARIS on May 4, 1896 A.D, revised at BERLIN on November 13, 1908 A.D, completed at BERNE on March 20, 1914 H, revised at ROME on June 2, 1928 A.D, at BRUSSELS on June 26, 1948 A.D, at STOCKHOLM on July 14, 1967 A.D, and at PARIS on July 24, 1971 A.D, and amended on October 2, 1979 A.D.

SAMA:

To ensure the effective implementation of the Security and Safety Guidelines the following responsibilities are to be undertaken by SAMA:

The Guidelines are to be implemented in full by all banks before the 01^st July 2009.

The Guidelines are to supersede the previous version and any associated amendments, circulars and memos.

All matters regarding the Security and Safety of the banks will be coordinated through SAMA. All correspondences, responses and requirements from external organisations, agencies and ministerial departments will be reviewed, assessed and forwarded as formal amendments to all banks.

Amendments and updates to the Guidelines will be provided by SAMA electronically and/or hardcopy as applicable.

Regular audits of the Guidelines will be carried out by SAMA or its nominated external consultants to ensure compliance and implementation by the banks.

Annual audits of the Guidelines will be conducted to ensure the accuracy and validity of its content. The audits will be conducted internally or by its nominated external consultants.

BANKS:

To ensure the effective implementation of the Security and Safety Guidelines the following responsibilities are to be undertaken by the Banks:

The Guidelines are to be implemented in full by all banks before the 01^st July 2009.

The Guidelines have been prepared to provide the minimum security and safety standards for all banks. It is expected, where applicable, that all banks will exceed these requirements and adopt internal standards and specifications dependant upon their structure and organisational needs.

The sections within the Guidelines have been designed to work in unison with each other and a clear understanding of its entire content is required.

The appointment of identified and capable personnel is to be undertaken to ensure the implementation of the Guidelines and its compliance.

All sections within the Guidelines are to be adhered to in full and will include the implementation of any subsequent amendments sent by SAMA.

The purpose of the Corporate Security and Safety Plan (CSSP) is to provide a single document that incorporates all the procedures and processes to ensure the security and safety of the banks staff, assets and customers.

The CSSP is to include the overall security and safety policy of the bank and identify locations requiring dedicated plans and procedures for specific facilities.

The CSSP is to include the minimum requirements contained within this section and be prepared, introduced and implemented by the appointed Security and Safety Manager and/or a nominated external consultant.

The CSSP is considered a strategic document that will have an impact on every aspect of the banks business and therefore requires senior management commitment and approval.

The CSSP is to include a Corporate Policy Statement that confirms the commitment by the banks senior management and their enforcement of its content.

To ensure the successful enforcement of the CSSP the bank is to appoint a Security and Safety Manager and who is provided the necessary assistance and support to carry out his duties and responsibilities.

Whilst the CSSP is to be enforced, controlled and managed by the Security and Safety Manager, Its preparation and implementation can be undertaken and/or assisted by a nominated external consultant.

The CSSP is to include the minimum requirements contained within these guidelines and be available for audit and assessment by SAMA and/or its nominated representatives.

The Corporate Security and Safety Plan (CSSP) is to include all aspects that would affect the security and safety of the banks' staff, assets and customers.

The CSSP is to incorporate the policies, procedures and processes for both general and detailed requirements.

Whilst common elements will affect the bank as a whole, the more detailed requirements will need to be prepared for specific facilities. These facilities include:

1. Regional Buildings
2. Branches
3. Cash Holding Facilities
4. Data Centres
5. Disaster Recovery (DR) Sites
6. Warehouses

To ensure a complete and consistent approach is incorporated within the preparation of the CSSP the following sections and elements are to be mandatory.

The purpose of installing electronic security and safety systems is to enhance the physical measures employed to protect, deter and mitigate the effects of a serious incident and/or criminal activity.

No single system in isolation is completely effective, and it is only through their layered approach, physical barriers, manned guarding, effective management and clearly identified procedures and policies can their use be fully maximised to best effect.

Due to the variety and availability of internationally recognised standards it is left to the bank and its internal policies and practices to dictate the appropriate standards for such systems.

The every increasing availability of systems, equipment and changes / advancements in technology provides an extensive selection of products to choose from. The selection of the appropriate systems and equipment is dependant upon the security and business requirements of the bank.

The guidelines contained within this document are designed to provide a minimum requirement that must be met and included for all electronic security and safety system installations.

The use of a CCTV Surveillance and Recording system is an essential element in an effective security and safety screen. The systems main functions within the bank environment are as follows:

1. Visual deterrence
2. Proactive and preventative surveillance on suspicious activity
3. Identification of individuals
4. Visual evidence in criminal investigations
5. Visual confirmation in the event of an incident
6. Post event analysis

The installation and connection of a CCTV surveillance network should consider the integration with related systems such as the Access Control, Intruder, Building Management and Fire Alarm systems.

An Access Control System is designed to provide a centralised control, management and recording of personnel throughout the banks facilities.

To ensure effective security of the banks facilities; its critical assets, and the prevention of unauthorised access a dedicated system is to be employed.

Electronic Access Control Systems include the following types:

1. Proximity Cards
2. Biometric
3. Digital Keypads

Access Control utilising mechanical locks and keys are Included within Section 4 'Physical Security and Safety Systems'.

To ensure the integrity and continuous operation of the Readers in the event of a power failure a separate battery back up supply is to be incorporated within the reader / controller. The internal battery is to have a minimum back up capability of 30 minutes.

Access control systems that utilise controllers are to have a maximum of eight (8) doors controlled from a single unit.

The central database for maintaining the record of authorised personnel and the access log is to have a separate automatic / simultaneous back up capability.

To ensure effective security, control and recording of specific locations and Restricted Areas, all banks are to implement one (1) of the above systems, mechanical alternatives or a combination of them and retain a log of events for a period of 6 months.

ID Cards:

All staff, contractors and visitors are to be issued and clearly display an ID Card that identifies them whilst in the banks facility.

The cards may be incorporated within the Access Control system technology described above or be independently produced.

All banks are to ensure an effective system is adopted for the process of requesting, issuing and managing of the ID Cards.

An Intruder Alarm System incorporates a number of different sensors to detect and alarm in the event of unauthorised access or presence.

All alarms are to be controlled through a panel and have both local and remote capability. Remote capability may include one or a combination of the following options:

1. External and separate Building / Branch / Security Control Room
2. Regional Building
3. Centralised Monitoring Station (CMS)

The remote location must have a 24 hour monitoring capability to ensure an effective response.

The bank is responsible for the preparation and implementation of effective response procedures in the event of receiving an alarm from any one of the identified systems.

The Intruder Alarm panel can either be a separate system or be combined with the Fire Alarm System.

The panel is to be located in a secure location and situated within a Restricted Area. Remote keypads for arming / disarming are to be located close to the exit of the area to be alarmed and not in a public area of the building or branch.

To ensure the integrity and continuous operation of the Intruder Alarm panel and its sensors / detectors in the event of a power failure a separate batten/ back up supply is to be incorporated. The use of a UPS system is to have a minimum back up capability of 48 hours.

The following sensors / alarms are to be fitted in the locations identified:

Hold Up / Panic Buttons:

These are designed to be activated if the operator / user is being attacked or threatened. The buttons are to be fitted in the following locations:

1. Teller Positions
2. Cash Officer
3. Cash Handling Area
4. Branch / Operations Manager
5. Vault / Safety Deposit Room
6. Security Guard (Branch)
7. Reception Desk (Main Buildings)
8. ATMs

The buttons can be of double operation and suitably protected and positioned against false activation.

Passive Infra Red (PIR) Sensors:

PIR sensors are designed to detect movement in a given area under their surveillance. Sensors are to be a minimum of dual technology and include enhanced features to minimise false alarms. The sensors are to be fitted in the following locations:

1. Access points to the Teller Area
2. Access route and door to the Vault / Safe / Safety Deposit Room
3. Emergency Exit doors (Ground Floor)
4. Data / Computer Room
5. Disaster Recover (DR) Sites
6. ATM Cabinet
7. ATM Service Room

The PIR sensor is to have a visual LED self test capability to demonstrate when movement is detected. This is to be active when in the armed or disarmed mode.

Seismic / Vibration Sensors:

Seismic sensors are used to detect vibrations from all types of attacks through solid structures. The primary purpose of the sensors is to protect and prevent access to the vault, cash holding areas and ATMs.

All sensors are to be flush mounted within the floor (where applicable), wall and ceilings and be suitably protected using a protective coverto prevent damage and as a trip hazard.

Locations to be fitted with seismic sensors are as follows:

1. Vaults - to cover all 4 walls, ceilings and floor (where there is a basement)
2. ATMs - to be fitted inside the body / cabinet of the unit

Additional sensors are to be fitted to walls and ceilings adjoining other commercial or private properties.

Magnetic Door Contacts:

Restricted Areas identified above that do not have Electronic Access Control Systems are to incorporate Magnetic Door Contacts and linked to the Intruder Alarm Panel. Additional locations include all ground floor Emergency Exit doors.

Magnetic Door Contacts are to be fitted to the internal side of the door and located at the top open corner. Dependant upon the construction material and design of the door alternative contacts / switches may be used.

All doors with Magnetic Contacts are to have effective heavy duty door closures fitted.

Glass Break Detectors:

Glass Break Detectors are to incorporate dual technology that is capable of analyzing both flex (impact) and audio (shattering) frequencies.

Prior to the fitting of the sensors the glazed areas are to be checked for their type (sheet / tempered / laminated) to ensure their effectiveness.

If the glazed panels have film fitted, are of tempered or laminate type there is norequirement for the detectors.

Where sheet glass is used it is to be supported by the detectors.

The installation of a dedicated, integrated and effective fire detection, alarm and suppression system is critical for the safety of the banks staff, assets, business and customers.

The installation of smoke detectors is to be included in all rooms, stairwells, corridors, lift shafts, and public areas of a banks facility.

Fixed temperature thermal detectors are to be fitted to all kitchen and tea room facilities. Special attention is to be given to the fitting of thermal detectors within ATMs.

To ensure effective identification and response to a potential alarm activation a maximum of 20 detectors are to be registered in each zone if the system is not of the addressable type.

Manual Call Points are to be installed next to emergency exits, escape routes and located close to the fire extinguisher and hose reel points. The distance between Manual Call Points should not exceed 30m.

On the activation of an alarm an audible ringing is to be heard throughout the entire facility. An audible bell and visual strobe is to be visible from outside the facility.

The internal bells are to be rated at 108 dB and external bells at 120 dB.

The strobe is to remain active until the system has been reset.

Both the strobe and bells must be tamper resistant.

All cabling is to be fire rated and not run alongside power cables.

All banks are to ensure the fire alarm panel has both local and remote capability. Remote capability may include one (1) or a combination of the following options:

1. External and separate Building / Branch / Security Control Room
2. Regional Building
3. Centralised Monitoring Station (CMS)

The remote location must have a 24 hour monitoring capability to ensure an effective response.

To ensure the Integrity and continuous operation of the Fire Panel, detectors and suppression systems in the event of a power failure a separate battery back up supply is to be incorporated. The internal battery is to have a minimum back up capability (under normal load) of 48 hours and then maintain the activation of the alarm for a further 5 minutes.

The bank is responsible for the preparation and implementation of effective response procedures in the event of receiving an alarm from the panel.

The Fire Alarm panel can be implemented as a separate system or combined along with the Intruder Alarm System. It is to be located In a secure room and remote annunciator panels near personnel operating on a 24 hour shift.

All installed equipment is to Include a one (1) year warranty period as standard.

On expiration of the warranty period all equipment is to be serviced and maintained by a qualified, recognised and registered supplier and/or service provider. A minimum schedule should include two (2) visits per year.

To ensure the effectiveness and capability of the system, regular internal tests are to be conducted. These tests are to be conducted on a monthly basis and the results recorded.

Evacuation procedures and floor plans identifying exit routes are to be prepared and positioned throughout the facility for maximum exposure.

All Emergency Exit doors are to be fitted with mechanical push bars / levers to facilitate a quick and easy access and open outwards In the direction of escape (Section 4).

To facilitate the safe evacuation process from a building once a fire alarm has activated the recruitment and training of Floor Wardens / Fire Marshalls is to be done from with the banks' staff.

Careful selection of individuals and their deputies will ensure all relevant areas are considered and included.

Internal and external lighting can enhance the security and safety requirements of the bank and assist the surveillance capabilities of the security guards and CCTV surveillance system.

Application, placement and types of lighting are to be carefully considered as part of the overall requirements.

All CCTV camera locations that do not have built in illumination are to be supported by external lighting.

All identified Restricted Areas are to maintain constant illumination.

All branches are to maintain constant lighting throughout the ground floor.

External lighting is to be available for all entry and exit points of a building including emergency exit doors.

Emergency lighting incorporating an internal battery back up capability is to be available in the event of a power failure and automatically activate.

Emergency lighting is to be fitted in the following locations:

1. Emergency Exit Routes
2. Emergency Exit Doors
3. Fire Extinguisher and Hose Reel Locations
4. Manual Fire Alarm Points
5. Restricted Areas

Emergency lighting must be capable of operating for minimum of 3 hours and fitted no less than 2m from ground level.

Emergency Exit signs that are not self illuminating and to be covered by the back up system.

Whilst the main power for the banks facilities will be supplied from the electrical grid there may be occasions where a disruption or power failure is experienced.

As identified above, all the main security and safety systems are to incorporate an emergency battery / UPS back up system that will provide sufficient power for a minimum of 30 minutes. This is designed to provide sufficient time to secure the premises until normal power is resumed.

In critical facilities the use of emergency generators is to be used. The following locations are to incorporate generators:

1. Head Office Buildings
2. Regional Head Office Buildings
3. Data / Computer Buildings
4. Cash Centres / Main Cash Holding Facilities

Dependant upon business and bank requirements, additional buildings / facilities may be identified for generator back up.

Once systems have been installed it is essential they are properly serviced and maintained by qualified, approved and experienced service providers.

The adoption of a comprehensive service and preventive maintenance contract will mitigate the possibility of system failure in the event of an incident and prolong the life of the equipment.

A minimum schedule of three (3) visits is to be conducted for all locations. Locations include main buildings, branches, data and cash centres, ATMs and warehouses.

The purpose of installing physical security and safety systems is to enhance the electronic and procedural measures employed to protect, deter and mitigate the effects of a serious incident and/or criminal activity.

No single system in isolation is completely effective, and it is only through their layered approach, physical barriers, manned guarding, effective management and clearly identified procedures and policies can their use be fully maximised to best effect.

Due to the variety and availability of internationally recognised standards It is left to the bank and its internal policies and practices to dictate the appropriate standards for such systems.

The every increasing availability of, equipment and changes / advancements in technology provides an extensive selection of products to choose from. The selection of the appropriate systems and equipment is dependant upon the security and business requirements of the bank.

The guidelines contained within this document are designed to provide a minimum requirement that must be met and included for all physical security and safety system installations.

The first line of deterrence and protection for any facility is the application of measures to secure the external perimeter.

The effective use of measures and systems will greatly reduce the risk of criminal elements considering the facility a potential target for their activities and in preventing easy access.

Should the external security and safety measures be defeated and/or bypassed the internal systems are designed to delay and deter criminal activity as part of a layered methodology.

The internal security measures primarily concentrate on the Restricted Areas identified within a facility so that security can be effectively and efficiently focused.

Restricted Areas: are considered as follows:

1. Vaults, Safes and Safety Deposit Rooms
2. Teller Areas
3. ATM Service Rooms
4. Cash Holding Areas
5. Cash Handling Areas
6. Building Access / Entry Points
7. Security Control Room
8. Data / Computer Rooms
9. IT / Communication Rooms
10. Disaster Recovery (DR) Sites
11. Electrical Rooms

Additional locations can utilise either electronic and/or mechanical means to secure their access and include the following:

1. ATM Cabinets
2. Generator Rooms
3. PTT/PABX Room
4. SCECO Switch Room
5. Electrical Rooms

All Restricted Area doors are to have effective heavy duty door closures fitted.

The Cash in Transit (CIT) operations currently pose the greatest risk to the banks. It is during the transit and movement of cash and valuables between the secure storage locations that it is most vulnerable.

This section describes the internal procedures and requirements of the bank for the movement, handling and safeguarding of cash and valuables.

As all banks outsource the CIT function a separate document has been prepared for companies that provide this service.

This section is designed to work in coordination and conjunction with the other section requirements outlined within the SAMA Guidelines.

Cash:

Includes both local and foreign currency bank notes and coins.

Valuables:

Includes all negotiable documents and materials such as cheques, bills, bonds and guarantees. This also includes precious stones, metals and customer safety deposit boxes.

CIT Manager:

This person is assigned by the bank and responsible for the internal coordination of the CIT service and is to be assisted by identified personnel for kingdom wide operations.

Consignor:

The person or party involved in the dispatch/sending of the cash or valuables.

Consignee:

The person or party involved in the receipt of the cash or valuables.

To ensure the security and safety of the CIT operations the bank is responsible for maintaining and coordinating the necessary documentation for the movement and handling of cash and valuables.

The following records and documentation is required:

1. CIT Operating Schedule - an operating schedule is to be prepared by the bank or CIT service provider for all transportation, deliveries, pick ups and ATM replenishments. The schedule is to be sent to the police by the end of the previous working day. Copies of the schedule are to be held by the bank and CIT service provider.

2. CIT Transfer Record - a transfer record of all cash and valuables is to be maintained by the bank and include the following:

a. Names and signatures of carriers, consignees and consignor

b. Date and time of transfer

c. Cash amount or content of consignment

d. Condition of consignment

e. Seal numbers

f. Departure and destination

3. Corporate Security and Safety Plan (CSSP) - the CSSP is to include a detailed list of procedures and processes for the internal movement and handling of cash and valuables. These procedures are to be sent to SAMA for verification and approval. Procedures are required for the following:

a. Custodians / ATM replenishment teams

b. Branches (Vaults / Safes / Safety Deposit Boxes)

c. Cash Centres/Holding Areas

The bank is responsible for the compliance of these guidelines and may utilise the services of an external security consultant to ensure the CIT requirements are met for all applicable facilities and equipment.

The CIT Manager and/or the Security and Safety Manager are responsible for the implementation, coordination and maintenance of the above requirements.

The external transportation of cash and valuables is primarily undertaken by CIT service providers. The requirements, procedures and regulations for these companies are contained within the separate document 'Cash in Transit Procedures for Transportation Companies'.

To ensure the secure and safe movement and handling of cash and valuables, the minimum requirements for banks are as follows:

1. Canvas Bag Container - to have a double flap and be capable of attaching a uniquely numbered plastic or metal seal.

2. Cassette Container - to be constructed of heavy duty plastic or metal and be capable of attaching a uniquely numbered plastic or metal seal.

3. Self Sealing Container - to be constructed of thin gauged plastic and be individually coded and/or numbered.

The bank is responsible for the coordination, verification and performance of the CIT service provider. Regular assessments of the service providers' procedures are to be conducted by the CIT Manager, Security and Safety Manager and/or external consultant.

The transportation of cash and valuables outside the banks property is to be notified to the appointed police contact by the bank or CIT service provider.

Should the CIT service provider not be able to deliver a consignment in time the SLA is to clearly identify the procedures for storing and securing it until it can be delivered.

The use of the above mentioned CIT Operating Schedule will ensure the police are aware of the routes, locations and activities.

Whilst it is preferable to have a police escort and presence during the delivery operations and ATM replenishment it may not be possible due to availability of resources. It is the banks responsibility to ensure they are informed and maintain the CIT schedule they, or the service provider, has established.

The CIT Manager is responsible for the coordination of the schedule and that the police are provided sufficient notice.

To ensure suitable supervision, accountability and security in the preparation of the cash and valuables for transportation, this is to be a dual control operation. A minimum of two (2) bank employees are responsible for the counting, packing and sealing of the bags/containers. Ultimate responsibility is with the following personnel:

1. Cash Officer
2. Chief Cashier/Teller

Nominated deputies can undertake this task but must be authorised by the above.

Dual control is to be maintained until the transfer has taken place and the CIT Transfer Form has been completed.

The Branch Manager or Cash Centre Manager is to coordinate with the above staff to identify the transfer of cash and valuables for the next working day with the CIT service provider.

The CIT Manager or representatives are to ensure the CIT Transfer Forms and Records are correctly completed, maintained and securely stored for each location.

Once the preparatory phase has been completed the two (2) authorised personnel are to recheck seals and the security of the bags or containers and verify the transporting personnel against their ID cards.

On completion and signing of the CIT Delivery Receipt Form the bags or containers are to be handed over to the authorised carriers.

The original and a copy of the CIT Transfer Form are to be sent in a sealed envelope to the consignee.

If cash or valuables are being sent to SAMA an authorised bank employee is to be present during the handover. The authorised employee is to acknowledge the receipt of the consignment from the carriers after checking the bags or containers are securely sealed.

The authorised bank employee is then to deposit the consignment, forward the deposit receipt and record the transaction.

Only authorised bank employees are to receive the cash and valuables from the carrier along with the CIT Transfer Form.

On verifying that the bags or containers are securely sealed the two (2) authorised bank employees are to sign the CIT Delivery Receipt Form.

On confirming the contents of the bags or containers are correct and in order, the two (2) authorised bank employees are to sign the CIT Transfer Form.

On completion and recording of the checks and receipt of the consignment, a copy of the CIT Transfer Form is to be sent to the consignor.

The Cash Officer or Cash Centre Manager is responsible for checking the forms and records in line with the procedures laid down in the CSSP.

Cash and valuables being received from SAMA is to follow the above (6.0) requirements.

If a discrepancy Is identified during the preparation, receipt or delivery of cash and valuables the following actions are to be undertaken:

1. Insecure Bags or Containers - in the event of tampering, missing seals and/or any other signs of insecurity of the bags or containers they are to be refused unsigned and returned to the carrier immediately for investigation.

The authorised checking personnel are to make a report and the following are notified and sent a copy of the report:

a. Cash Officer / Cash Centre Manager

b. Branch Manager

c. CIT Manager / Regional Representative

d. Consignor Manager

When returned consignor the bag or container is to be checked by the original authorised personnel for verification.

In the event of a loss of cash or valuables a report is to be prepared and signed by both the consignor and consignee.

2. Discrepancy in Cash or Valuables - in the event of a discrepancy between the CIT Transfer Form and the contents of the bag or container the above actions are to be followed once a confirmation has been made between the Branch Manager / Cash Centre Manager and the consignor regarding the CIT Transfer Form..

All original reports are to be held and maintained by the CIT Manager for safe keeping.

Dependant upon the nature of the incident and whether it was resolved or not, the CIT Manager may involve the Security and Safety Manager and/or other identified personnel should further investigations be required.

Training is to be provided for personnel authorised to conduct these operations that includes the following:

1. Anti Money Laundering (AML)
2. Procedures and processes for the movement of cash and valuables as per the CSSP
3. Procedures in the event of armed robbery and/or criminal acts

The replenishment and servicing of Automated Teller Machines (ATM) is to be regarded as a CIT operation when the machine cannot be replenished within a secure area.

The replenishment operation is to be undertaken by a minimum of two (2) authorised personnel.

All replenishment operations are to be conducted in the presence of armed guards.

Lobby ATMs:

Where relevant, all doors and access points to the ATM lobby or replenishment area are to be secured and locked prior to the opening of the ATM.

The use of blinds and screens are to be maximised to prevent unnecessary visibility of the replenishment operation.

External ATMs:

The replenishment teams will be assisted by the team in the armoured car. The cash containers are to remain in the vehicle until they are required and are as close to the ATM as possible.

During the replenishment the armoured car team is to remain vigilant and is responsible for the protection of the team and the cash containers.

Dependant upon availability the police may also be present to provide additional security and protection to the replenishment teams and the cash containers.

Should the replenishment schedule change from the prepared Itinerary this is to be communicated back to the CIT Manager or regional representative. Any changes are to be sent to the nominated contact in the police to ensure their presence during transit and replenishment operations.

Police presence is dependant upon availability of resources and CIT operations should maintain their schedule of timings and identified routes.

Training is to be provided for personnel authorised to conduct these operations that includes the following:

4. ATM Security and Safety Systems

5. Procedures and processes for the movement of cash and valuables as per the CSSP

6. Procedures in the event of armed robbery and/or criminal acts

In addition to the installation and implementation of other security and safety measures to protect the banks' main buildings and branches, a security guarding service to be used.

The purpose of using security guards is to enhance the electronic and procedural measures employed to protect, deter and mitigate the effects of a serious incident and/or criminal activity.

No single system in isolation is completely effective, and it is only through their layered approach, physical barriers, manned guarding, effective management and clearly identified procedures and policies can their use be fully maximised to best effect.

The guidelines contained within this document are designed to provide a minimum requirement that must be met and included for the use of security guards for the banks main buildings and branches.

The security guard(s) is intended to compliment the use of other security and safety systems, measures and equipment.

The deployment of security guards throughout the banks main buildings and branches is to be closely monitored and supervised by the service provider and the banks personnel.

To ensure sufficient guards are available to carry out their responsibilities, an assessment is to be carried out to identify the quantity and requirements. This can be part of the Security Risk Assessment or undertaken as a separate report.

The security guards can be contractors or directly employed by the bank.

Detailed responsibilities and requirements are to be identified within the Corporate Security and Safety Plan (CSSP) and controlled, monitored and enforced by the Security and Safety Manager.

The primary responsibilities of the security guard is as follows:

1. Provide an effective physical and visual deterrent.
2. Provide effective control of access and entry points.
3. Provide an effective response to security and safety incidents.

The primary requirements of the security guard is as follows:

1. They are to be a Saudi national.
2. Clearly identifiable and appropriate uniform is to be worn at all times.
3. Maintain the Security Guard Shift Report.
4. Fully trained and prepared for their function and location.

All security guard reception/entry locations are to maintain a Shift Report that records all the events and activities for each shift. The security guard/supervisor Is to include the following Information:

1. Date, time and guard names for each shift changeover.
2. Suspicious activity identified during the shift period.
3. Incidents/Events during the shift period.
4. Activation of Alarms.
5. Security and Safety equipment check and test.

The Security and Safety Manager is to ensure that the information contained within the Security Guard Shift Report is reported, acknowledged and any appropriate action taken. Apart from immediate/emergency actions the report is to be checked and acknowledged at the start of each working day.

Prior the changeover between shifts, the oncoming guard is to have physically checked his area of responsibility and acknowledged the content of the previous shift report.

All security guard locations are to have detailed Post Instructions that clearly identify their function, responsibilities, incident response and reporting chain. These will form part of the CSSP (Section 2).

The effective use of security guards will greatly reduce the risk of criminal elements considering the facility a potential target for their activities and in preventing easy access.

One of the primary responsibilities of the security guard is the control of access to the building or branch.

To assist in the control and identification of personnel an ID Card system is to be employed by all banks.

All security guards are to be aware of the Restricted Areas within their area of responsibility.

All buildings and branches are to have 24 hour security guard presence and working hours and overtime are to conform to the regulations laid down in the Saudi Labour Laws and are the responsibility of the service provider.

The security guards are responsible for the enforcement of a Clear Desk Policy and are to report any infringements within their shift reports.

Whilst it is mandatory for all buildings and branches to maintain 24 hour security, the installation of a remotely monitored alarm/surveillance capability may be considered for the reduction in security guard numbers and presence.

All implemented and/or proposed systems should be prepared in writing and sent direct to SAMA for review and consideration.