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Controls on the Signature of Customers on the Bonds of the Order Without Data (Blank) in Exchange for Access to Banking Facilities

No: 271000000743 Date(g): 9/1/2007 | Date(h): 19/12/1427 Status: In-Force

Translated Document

We would like to inform you of the issuance of the Royal Order No. 8195/M.B. dated 13/11/1427H, which includes the approval of the recommendations stated in the report of the ministerial committee formed to study the issue of some bank customers signing promissory notes without data (blank) in exchange for obtaining bank facilities. It was concluded that signing blank is permissible based on Article 5 of the Anti-Forgery Law* issued by Royal Decree No. M/114 dated 26/11/1380H, as well as what is stated in Article 14 of the Commercial Papers Law issued by Royal Decree No. M/37 dated 11/10/1383H and the judicial decisions issued by the committees for settling commercial paper disputes.

Based on the aforementioned Royal Order and the recommendations aimed at preventing the misuse of signing blank, it is required that banks operating in the Kingdom observe the following controls when conducting banking transactions:

  1. In the case of loans and credit facilities with specified limits and due dates, the bank must ensure that all data on the promissory note or notes is filled out upon signing in accordance with the loan amount or the limit of the facilities.
  2. In the case of renewing the relationship with the customer or modifying the loan or facility, the bank must return the promissory note or notes related to the renewed or modified contract to the customer and obtain another note in light of the new relationship as mentioned in paragraphs (1 and 2).
  3. The bank must limit claims under the promissory note or notes to the amount owed by the customer according to the relationship documents and account statements when filing a lawsuit.
  4. The bank must not use the promissory note for purposes other than those for which it was created.

Therefore, SAMA hopes to implement the above controls and operate under them as of this date, and to inform all your branches accordingly.

* The Anti-Forgery Law issued by Royal Decree No. M/114 dated 26/11/1380H, was replaced by the Penal Code for Forgery Offenses, issued by Royal Decree No. (M/11) dated 18/02/1435H.