Loans to Deposits Ratio Guidelines
No: 44071146 Date(g): 27/3/2023 | Date(h): 6/9/1444 Status: In-Force Based on the Central Bank Law issued by Royal Decree No. (M/36) dated 11/04/1442 H and the Banking Control Law issued by Royal Decree No. (M/5) dated 22/02/1386 H. With reference to Central Bank Circular No. (392) dated 01/07/1427 H. and supplementary Circular No. (391000072844) dated 06/25/1439 H., including the Guidelines for Calculating the Loan-to-Deposit Ratio.
Please find the updated loan-to-deposit ratio guidelines which replaces the above-mentioned loan-to-deposit ratio guidelines. They aim to promote the diversification of banks' funding sources and support lending.
For your information and action accordingly as of June 1, 2023 G.
1. Introduction
In line with SAMA’s continuous efforts to maintain the quality and soundness of banks' regulatory ratios and to support banks in managing their liquidity, SAMA has reviewed the existing Loans to Deposits Ratio (LDR) guidelines to comprehensively capture banks' funding base.
These guidelines are issued by SAMA in exercise of the authority vested in SAMA under the Central Bank Law issued via Royal Decree No. M/36 dated 11/04/1442H, and the Banking Control Law issued 01/01/1386H.
These guidelines supersede the Loans to Deposits Ratio Guidelines circular No B.C.S 392 dated 01/07/1427H and subsequent guidelines for calculating Loans to Deposits Ratio (LDR) issued via SAMA circular No 391000072844 dated 25/06/1439H.
2. Implementation Timeline
These guidelines will be effective as of 1St of June 2023.
3. Reporting Requirements
Banks are required to report the Loan to Deposit ratio (LDR) to SAMA on consolidated basis using the updated LDR returns on monthly basis. The ratio should include local and foreign currency transactions of resident and non-resident entities of the bank.
4. General Requirements
4.1 The Loans to Deposits Ratio is defined as net loans divided by deposits after applying weights:
4.2 Net Loan (The numerator) for the purpose of these guidelines, includes Loans and advances after deducting the following :
• Provisions for loan losses;
• Unearned commissions income;
• Commission in suspense.
4.3 Deposits (The denominator) for the purpose of these guidelines, includes the following components:
a. Deposits and Repos.
b. Long Term Debts:
• Sukuks/ Bonds;
• Syndicated debts;
• Subordinated debts;
• Other Debts (any other long term debts not classified above).
4.4 For avoidance of doubt, interbank transactions and transactions with SAMA should not be included in the LDR calculation, unless specifically stated by SAMA.
4.5 SAMA expects banks to maintain total LDR below 90%, Subject to numerator not exceeding unweighted denominator.
5. Weighted Denominator Calculation
5.1 Banks will apply the weights below to the denominator components (as applicable) in order to compute the weighted amount:
Demand/over night Less than 1M (1-30 D) 1-3 M (31-90D) 3-4 M (91-120 D) 4-6 M (121-180 D) 6-8 M (181-240 D) 8 M - 1Y (241-365 D) Over 1 Y to 2 Y Over 2 Y to 5 Y Over 5 Y 100% 105% 110% 115% 120% 130% 140% 150% 170% 190%
Table (1): *D= Days / M= Months / Y= Years
5.2 Original maturities should be used for new transactions while outstanding transactions should be based on residual maturities.
5.3 For callable sukuks/bonds, residual maturity is calculated based on the first callable date of the sukuks/bonds to determine the applicable weight in the table (1).
5.4 For perpetual sukuks/bonds, banks should apply 190% weights unless the sukuks/bonds have a callable date then the sukuks/bonds weight will be applied based on the sukuks/bonds callable date.
Soft Launch
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SAMA Regulatory Rulebook is a platform that aims to assist the regulated entities to access SAMA regulatory content adeptly and efficiently.
SAMA Regulatory Rulebook is still on its development and soft launch stage. SAMA is not liable for its contents and does not warrant or represent that (the Services related to the platform, information or material presented in the platform) is displayed free of any inaccuracies, omissions, or errors (“Faults”). SAMA accepts no liability for any loss, claim or damage resulting from any use of the platform, and any decisions made, or actions taken based on the information contained in or generated by the platform.
SAMA Regulatory Rulebook has no legal effect and it does not aim to amend or revoke any legal provisions. The Rulebook still Contains some documents under review, including translated versions. Therefore, SAMA Regulatory content circulated through SAMA official channels remains in force.
Without prejudice to the terms of use of SAMA website Hereby, you acknowledge that any illegal, unauthorized use and/or any breach of any of these provisions may result in legal actions against you.
Your access and use of SAMA Regulatory Rulebook and its content is considered as an acceptance and approval of commitment by you without any limitation or condition to the following:
SAMA Regulatory Rulebook is a platform that aims to assist the regulated entities to access SAMA regulatory content adeptly and efficiently.
SAMA Regulatory Rulebook is still on its development and soft launch stage. SAMA is not liable for its contents and does not warrant or represent that (the Services related to the platform, information or material presented in the platform) is displayed free of any inaccuracies, omissions, or errors (“Faults”). SAMA accepts no liability for any loss, claim or damage resulting from any use of the platform, and any decisions made, or actions taken based on the information contained in or generated by the platform.
SAMA Regulatory Rulebook has no legal effect and it does not aim to amend or revoke any legal provisions. The Rulebook still Contains some documents under review, including translated versions. Therefore, SAMA Regulatory content circulated through SAMA official channels remains in force.
Without prejudice to the terms of use of SAMA website Hereby, you acknowledge that any illegal, unauthorized use and/or any breach of any of these provisions may result in legal actions against you.