On 1/1/1439 H. (21/9/2017 G.), the Saudi Arabian Monetary Agency has issued circular number 391000000353 (the "Circular") requiring financial institutions to verify the suitability of variable-cost (e.g. SIBOR or LIBOR-based) real estate financing products ("Products") offered to individual customers ("Customers"), based on the personal circumstances of said Customers.
The Circular reminds financial institutions of the importance of explaining to Customers the nature of Products, their costs, anticipated benefits and risks.
The Circular requires financial institutions to offer Customers an option to reschedule payments, terminate their arrangements or to convert those into fixed-cost products.
The Circular emphasizes that the options given to Customers should not be coupled with additional administrative fees. Also, in the event of the discontinuation of any Product, Customers should not be required to bear the costs for the remaining term period and the rules relating to early settlement would be applied in this respect.
The Circular requires financial institutions to provide within ten days a list of all Customers, as well as a report on the steps taken towards the implementation of the Circular.
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