1. Introduction

   1.1. The market for repurchase agreements (repo) is an important source of secured short-term funding, complementing other sources of funding in the banking system. A well-developed repo market would also enhance the breadth and depth of Saudi Arabia's bonds and sukuk markets.

   1.2. To develop an orderly Saudi repo market, it is important that the Saudi repo market operates with standard market practices in line with global best practices and underpinned by professional conduct as well as prudent and sound risk management practices.

2. Objectives

   2.1. These guidelines issued by Saudi Central Bank (SAMA)'s set out policy requirements for repo transactions to:

         2.1.1. Ensure that repo transactions are conducted in a manner that is consistent with SAMA's regulatory requirements and the objectives of developing an orderly repo market; and

         2.1.2. Ensure that repo market participants practice sound and comprehensive risk management, including the adoption of standard legal documentation.

3. Legal Provisions

   3.1. These guidelines are issued by SAMA in exercise of the powers vested upon it under its Charter issued by the Royal Decree No.36 on 11-04-1442H (26 November 2020G) and the Banking Control Law issued by the Royal Decree No. M/5 on 22-02-1386H (11 June 1966G) and the rules for Enforcing its Provisions issued by Ministerial Decision No 3/2149 on 14/10/1406AH. 

   3.2. All policy requirements in these guidelines are binding on participants in the Saudi repo market. 

   3.3. These guidelines shall be read together with:

         3.3.1. Relevant rules and regulations issued by SAMA;

         3.3.2. Saudi Capital Market Law and the relevant rules and regulations issued by the Capital Market Authority (CMA) of Saudi Arabia;

         3.3.3. Saudi Bankruptcy Law issued by the Ministry of Commerce (MOC);

         3.3.4. Rules and regulations issued by the Ministry of Investment of Saudi Arabia (MISA);

4. Effective Date

   4.1. This guideline will come into effect as of the date of issuance.

5. Applicability

Market participants

   5.1. These guidelines shall apply to all repo market participants, defined as eligible counterparties in Section 9.

Types of repo transactions

   5.2. These guidelines are applicable to any Saudi Riyal (SAR) denominated, outright sale or purchase of eligible securities with an agreement to repurchase or resell the same or equivalent eligible securities at an agreed specified future date or on demand, subject to mutual agreement.

   5.3. For avoidance of doubt, there is no prohibition on bank's existing repo transaction entered into with a domestic or foreign counterparty, where the securities or cash leg is denominated in foreign currency and the transaction is governed by the GMRA, subject to compliance to the relevant and applicable rules and regulations in Saudi Arabia.

6. Terms and Definitions

   6.1. In these Guidelines, unless the context otherwise requires, the following terms shall have the following meanings:

         6.1.1. Custodian: It is a third party that provides services in relation to collateral of a repo transaction, which may include providing custody of the collateral, collateral management, collateral account segregation and other ancillary operations during the life of the transaction;

         6.1.2. Eligible Security: an eligible security (or referred to as collateral) that the repo seller provides to the repo buyer to secure funding and meet the requirements in Section 10;

         6.1.3. GMRA: Global Master Repurchase Agreements;

         6.1.4. Held-in-Custody: It is an arrangement in a repo transaction, where the repo seller retains or a third party is appointed, to retain the collateral security in a segregated account;

         6.1.5. HNWI: High Net Worth Individual

         6.1.6. ICMA: International Capital Market Association;

         6.1.7. Master Repo Agreement (MRA): It is a standardized contract approved by SAMA, that provides all terms and conditions of a repo agreement between a repo buyer and a repo seller;

         6.1.8. Repurchase Agreement (Repo): It is an agreement where a seller sells securities to a buyer with a simultaneous promise arrangement for the buyer to resell or for the seller to repurchase the same or equivalent securities for an agreed price at a specified future date or on demand. In addition, repo term will be used commonly in this guideline referring to repo and reverse repo equivalently unless otherwise is specified.

         6.1.9. Reverse Repurchase Agreement (Reverse Repo): It is an agreement where a buyer buys financial securities from a seller with a simultaneous promise arrangement for the seller to repurchase or for the buyer to resell the same or equivalent securities for an agreed price at a specified future date or on demand;

         6.1.10. Repo Buyer: A market participant who is a cash provider at the repo transaction start date;

         6.1.11. Repo Seller: A market participant who is a securities provider at the repo transaction start date

         6.1.12. Repo market participants: Eligible counterparties referred to in Section 9;

         6.1.13. SOCPA: Saudi Authority of Auditors and Accountants

         6.1.14. SARIE: The Saudi Arabian Riyal Interbank Express or any other future instant payments system;

         6.1.15. Saudi Repo Market: It is a part of the financial markets in which financial securities are exchanged through an agreement for cash and vice versa in Saudi Arabia;

         6.1.16. Tadawul: Saudi Exchange.