This Regulation applies to Netting Agreements and related Financial Collateral Arrangements in connection with one or more Qualified Financial Contracts entered into with at least one Party that falls under SAMA supervision, it shall also apply to Netting Agreements and related Financial Collateral Arrangements in connection with one or more Qualified Financial Contracts to which a Bankrupt Party is a Party supervised by SAMA.

The following terms and expressions mentioned in this Regulation shall have

the meanings assigned to them below unless the context requires otherwise:

Netting: The operation of a set of provisions in a Netting Agreement between

two Parties that may be commenced by notice given by one Party to the other

upon the occurrence of an event of default with respect to the other Party or

other termination event or that may occur automatically, in certain circumstances, as specified in the Netting Agreement; and has the following

effect:

• (1) The termination, liquidation and/or acceleration of any present or

  future payment or delivery obligations or entitlements under or in

  connection with one or more Qualified Financial Contracts to

  which a Netting Agreement applies.

• (2) The calculation or estimation of a close-out value, market value,

  liquidation value or replacement value in respect of each obligation

  or entitlement or group of obligations or entitlements terminated,

  liquidated and/or accelerated under paragraph Error! Reference

  source not found. of this definition.

• (3) The conversion of any values calculated or estimated under

  paragraph Error! Reference source not found. of this definition

  into a single currency.

• (4) The determination of the net balance of the values calculated under

  paragraph Error! Reference source not found. of this definition,

  as converted under paragraph Error! Reference source not found.

  of this definition, by the operation of netting or set-off, giving rise

  to the obligation of one Party to pay an amount equal to the net

  balance to the other Party.

Netting Agreement:

Any agreement between two Parties that provides for Netting of present or

future payment or delivery obligations or entitlements arising under or in

connection with one or more Qualified Financial Contracts to which the

agreement ("Netting Agreement" applies and it includes without

limitation:

• (1) Any agreement between two Parties that provides for netting of the

  amounts due under two or more Netting Agreements.

• (2) Any Financial Collateral Arrangement related to or forming part of

  one or more of the foregoing agreements.

Qualified Financial Contract: Any financial agreement, contract or

transaction, including any terms and conditions incorporated by reference in any such financial agreement, contract or transaction, under or in relation to

which any payment or delivery obligations are due to be performed at a

certain time or within a certain period of time and whether or not subject to

any condition or contingency; and it includes the Qualified Financial

Contracts shown in annex (1), and any subsequent amendments to it.

Central Bank (SAMA): The Saudi Central Bank.

Bankruptcy Law: The Bankruptcy Law issued by Royal Decree No. (M/50)

dated 28/05/1439H and Council of Ministers Resolution No. (264) dated

27/05/1439H, and its implementing regulation issued by Council of

Ministers Resolution No. (622) dated 24/12/1439H, and any subsequent

amendments to it.

Movable Property Security Law: The Movable Property Security Law issued

by Royal Decree No. (M/94) dated 15/08/1441H and Council of Ministers

Resolution No. (512) dated 14/08/1441H, and its implementing regulation,

and any subsequent amendments to it.

Law of Systemically Important Financial Institutions: The Law of

Systemically Important Financial Institutions issued by Royal Decree No.

(M/38) dated 25/04/1442H and Council of Ministers Resolution No. (253)

dated 23/04/1442H, and any subsequent amendments to it.

o The procedures stipulated in Article (Two) of the

Bankruptcy Law, which includes any of the following:

• (1) Protective settlement.

• (2) Financial restructuring

• (3) Liquidation.

• (4) Small debrors protective settlement.

• (5) Small debtors' financial restructuring.

• (6) Small debtors' liquidation.

• (7) Administrative liquidation.

Bankruptcy Trustee: A designated person to manage any of the Bankruptcy

Proceedings in accordance with the Bankruptcy Law, this includes the

Bankruptcy Trustee as defined in the Bankruptcy Law.

Bankruptcy Commission: The bankruptcy commission

pursuant to Article (Nine) of the Bankruptcy Law.

established

Party: A person constituting one of the parties to a Netting Agreement or

Multibranch Netting Agreement.

Non-bankrupt Party: A Party where it is the counterparty to a Bankrupt

Party-

Bankrupt Party: The Party in relation to which any of the Bankruptcy

Proceedings had commenced pursuant to the Bankruptcy Law.

Cash: Money credited to an account in any currency, or a similar claim for

repayment of money, such as a money market deposit.

Collateral: Any money or asset or other credit support, including without

limitation, any of the following:

• (1) Cash in any currency.

• (2) Any kind of securities, which includes, without limitation, shares and

  debt instruments.

• (3) Guarantees, letters of credit and obligations to reimburse.

• (4) Any asset used as collateral in the Kingdom of Saudi Arabia, without

  prejudice to the provisions of the Movable Property Security Law and

  any other relevant laws.

Financial Collateral Arrangement: Any arrangement for the provision of

Collateral or margin or other credit enhancement related to or forming part of

a Netting Agreement, or one or more Qualified Financial Contracts to which

a Netting Agreement applies, including without limitation:

• (1) a pledge or any other form of security interest in Collateral, whether

  possessory or non-possessory-

• (2) a Title Transfer Collateral Arrangement

• 3) any guarantee, letter of credit or reimbursement obligation by or to a

  party to one or more Qualified Financial Contracts, in respect of those

  Qualified Financial Contracts; or a Netting Agreement.

Title Transfer Collateral Arrangement: Any arrangement for the provision

of Collateral or margin relating to a Netting Agreement or a Qualified

Financial Contract under which the title of the Collateral or margin is i

transferred, by outright sale or by way of security, including without

limitation- a sale and repurchase agreement, securities lending agreement,

securities buy/sell-back agreement or an irregular pledge.

Foreign Multibranch Party: is an entity that is not organized, or

headquartered in the Kingdom of Saudi Arabia and that has entered into one

or more Qualified Financial Contracts through its branch or agency in the

kingdom of Saudi Arabia, and has entered into one or more Qualified

Financial Contracts in its Domicile.

Domicile: The Domicile of each Party to a Netting Agreement is the country

where its headquarters is located; in the event of multiple branches of this

Party, the country where a branch is located shall be considered the Domicile

in respect of the activities of such branch.

Multibranch Netting Agreement: A Netting Agreement between two i

Parties under which at least one Party is a Foreign Multibranch Party with a :

branch or agency in the Kingdom of Saudi Arabia.

Bankrupt Local Branch: A branch or agency in the Kingdom of Saudi Arabia

of a Foreign Multibranch Party that is subject to any Bankruptcy Proceeding

pursuant to the Bankruptcy Law in the Kingdom, regardless of whether the

Foreign Multibranch Party is subject to any bankruptcy proceeding in its

Domicile or in any other country.

Local Bankruptcy Trustee: A natural or corporate person appointed as a

Bankruptcy Trustee for the Bankrupt Local Branch under Bankruptcy

Proceedings in the Kingdom of Saudi Arabia.

Foreign Bankruptcy Trustee: A natural or corporate person appointed,

permanently or for a limited period only, as a bankruptcy trustee or other insolvency practitioner for a Foreign Multibranch Party under bankruptcy

proceedings in its Domicile or in any other country.

Global Net Payment Entitlement: The amount, if any, owed by the Non-

Bankrupt Party to the Foreign Multibranch Party as a whole after giving effect

to the netting provisions of a Multibranch Netting Agreement with respect to

all Qualified Financial Contracts subject to Netting under such Multibranch

Netting Agreement.

Global Net Payment Obligation: The amount, if any, owed by the Foreign

Multibranch Party as a whole to the Non-Bankrupt Party after giving effect to

the netting provisions of a Multibranch Netting Agreement with respect to all

Qualified Financial Contracts subject to Netting under such Multibranch

Netting Agreement.

Local Net Payment Entitlement: means -with respect to a Multibranch

Netting Agreement- the amount, if any, that would have been owed by the

Non-Bankrupt Party to the Foreign Multibranch Party after Netting only those

Qualified Financial Contracts entered into by the Non-Bankrupt Party with

the Bankrupt Local Branch to which a Multibranch Netting Agreement

applies.

Local Net Payment Obligation: means -with respect to a Multibranch

Netting Agreement- the amount, if any, that would have been owed by the

Foreign Multibranch Party to the Non-Bankrupt Party after Netting only those

Qualified Financial Contracts entered into by the Non-Bankrupt Party with

the Bankrupt Local Branch to which a Multibranch Netting Agreement applies.

The objective of this Regulation is to regulate Netting Agreements and related

Financial Collateral Arrangements in connection with one or more Qualified

Financial Contracts entered into with at least one Party that falls under SAMA

supervision and to ensure their enforceability in accordance with their terms

both outside the scope of Bankruptcy Proceedings and following the

commencement of any Bankruptcy Proceedings, according to the provisions

of article (Two Hundred Fourteen) of the Bankruptcy Law and article

(Seventy-Nine) of its implementing regulation.

SAMA may amend or designate as "Qualified Financial Contracts" any

agreement, contract or transaction, in addition to those listed in annex (1),

determined between SAMA and the Capital Market Authority, and agreed

with the Ministry of Commerce, pursuant to the provisions of article (Two

Hundred Fourteen) of the Bankruptcy Law and article (Seventy-Nine) of the

implementing regulation of the Bankruptcy Law.

A Qualified Financial Contract shall be enforceable and valid in accordance

with its terms against any of the Parties thereto and the enforceability and

validity of a Qualified Financial Contract shall not be affected by any

subsequent change to any of the circumstances in which the Qualified

Financial Contract was concluded.

a) Limitation on the Non-bankrupt Party's right to receive payment.

• (1) The liability of a Bankrupr Local Branch to a Non-Bankrupt Party

  under a Multibranch Netting Agreement shall be calculated as of

  the date of the termination of the Qualified Financial Contracts to

  which the Multibranch Netting Agreement applies in accordance

  with its terms and shall be limited to the lesser of:

  • 1- the Global Net Payment Obligation; and

  • 2- the Local Net Payment Obligation.

• (2) The liability of the Bankrupt Local Branch under paragraph (1) shall

  be reduced but not below zero by:

  • 1- any amount otherwise paid to or received by the Non-

    Bankrupt Party in respect of the Global Net Payment

    Obligation pursuant to such Multibranch Netting Agreement

    which if added to the liability of the Bankrupt Local Branch

    under paragraph (1) would exceed the Global Net Payment

    Obligation.

  • 2- the fair market value of, or the amount of any proceeds of,

    Collateral that secures or supports the obligations of the

    Foreign Multibranch Party under the Multibranch Netting

    Agreement and has been applied by the Non-Bankrupt Party

    to satisfy the obligations of the Foreign Multibranch party

    pursuant to the Multibranch Netting Agreement.

(b) Limitation on the Foreign Multibranch Party's rights to receive payment

• (1) The liability of the Non-Bankrupt Party to the Bankrupt Local

  Branch under a Multibranch Netting Agreement shall be assessed

  and calculated as of the date of termination of the Qualified

  Financial Contracts to which the Multibranch Netting Agreement

  applies in accordance with its provisions and terms and shall be

  limited to the lesser of:

  • 1- the Global Net Payment Entitlement.

  • 2- the Local Net Payment Entitlement.

• (2) The liability of the Non-Bankrupt Party under paragraph (1) shall

  be reduced but not below zero by any amount otherwise paid to or

  received by:

  • 1- the Local Bankruptcy Trustee on behalf of the Bankrupt Local

    Branch.

  • 2- any Foreign Bankruptcy Trustee on behalf of the Foreign

    Multibranch Party.

• in respect of the Global Net Payment Entitlement under the

  Multibranch Netting Agreement which, if added to the liability of

  Non-Bankrupt Party under paragraph (1), would exceed the Global

  Net Payment Entitlement

(3) The liability of a Non-Bankrupt Party under paragraph (1) shall also

be reduced, but not below zero, by the fair market value of, or the

amount of any proceeds of, Collateral that secures or supports the

obligations of the Non-Bankrupt Party under the Multibranch

Netting Agreement and has been applied by the Foreign

Multibranch Party or any Bankruptcy Trustee acting on its behalf to

satisfy the obligations of the Non-Bankrupt Party under the

Multibranch Netting Agreement to the Foreign Multibranch Party.

If the Non-Bankrupt Party to a Multibranch Netting Agreement has taken

Collateral under a Financial Collateral Arrangement that secures or supports

the obligations of the Foreign Multibranch Party under the Multibranch

Netting Agreement, the Non-Bankrupt Party may retain such Collateral and

apply it in satisfaction of the obligation of the Foreign Multibranch Party in

respect of the Global Net Payment Obligation. The Non-Bankrupt Party must

return any excess Collateral to the Foreign Multibranch Party.