Article 13 of the Saudi Finance Companies Control Law
المادة 13 من نظام مراقبة شركات التمويل
The article requires a finance company to set aside a provision to meet potential operating losses according to the standards the Regulations specify.
Official text (Arabic)
This article has not been amended since the law was issued.
على شركة التمويل أن تضع مخصصًا لمواجهة خسائر التشغيل المحتملة وفق المعايير التي تحددها اللائحة.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 13 explained in plain English
This article requires every finance company to set aside a provision, that is, an amount it holds back in its accounts, to meet potential operating losses.
The idea is that the company does not wait for a loss to occur before looking for a source to cover it, but prepares for it in advance. This protects the company itself and, indirectly, those who deal with it and its shareholders.
What to note:
- The article did not specify the amount of the provision, its percentage or how it is calculated.
- These details are specified according to the standards the Regulations specify, so they must be consulted to know the exact requirements.
This article comes after Article 12, which prohibits the company from certain high-risk forms of finance, such as finance without security except under the Regulations' rules. It is followed by Article 14, which allows the company to issue securities and sukuk in proportion to its assets and financial position. These articles share one aim, which is to preserve the strength of the company's financial position.
Companies that need to understand and apply these requirements can consult a lawyer who specializes in banking and finance, or an accounting specialist.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 13 of the Saudi Finance Companies Control Law
Must a finance company set up a provision for losses?
Yes. It must set aside a provision to meet potential operating losses.
How is the amount of the provision determined?
According to the standards the Regulations specify; the article itself does not specify it.
More articles on Financial Solvency of Finance Companies
- Article 14
The article allows a finance company to issue securities and sukuk under the Capital Market Law and its regulations, in proportion to its assets and financial position and without prejudice to Article 3.
مع عدم الإخلال بما ورد في المادة (الثالثة) من هـذا النظام؛ يجـوز لشـركـة التمويـل - وفق ما تحدده اللائحة وبما يتناسب مع أصولها ومركزها المالي - إصدار الأوراق ال
- Article 22
The article lists subjects the Regulations organize, including finance limits, security ratios, disclosure of the cost of finance, consumer protection, advance payments and debt collection.
تنظم اللائحة ما يأتي: 1- الحد الأعلى لمجموع التمويل الذي يجوز لشركة التمويل تقديمه. 2- منع شركة التمويل من إجراء تعاملات ائتمانية معينة، أو تقيـيـدها في ذلك. 3-
- Article 23
The article requires a finance company to comply with the capital adequacy ratio rules as the Regulations specify.
يجب على شركة التمويل أن تتقيد بقواعد معدل كفاية رأس المال وفقًا لما تحدده اللائحة.
- Article 24
The article requires a finance company to diversify the risks of its activity and bars it from financing a single establishment or a group of interconnected ownership beyond the percentage the Regulations specify.
يجب على شركة التمويل تنويع مخاطر نشاطها، ولا يجوز أن تمنح تمويلاً لمنشأة واحدة أو لمجموعة مترابطة الملكية بما يتجاوز النسبة التي تحددها اللائحة.
- Article 25
The article requires SAMA's approval to amend a finance company's capital or articles, or for its merger into or acquisition of a similar company, subject to other laws.
مع مراعاة ما تقضي به الأنظمة؛ يجب الحصول على موافقة المؤسسة لتعديل رأس مال شركة التمويل، أو تعديل نظامها، أو اندماجها في شركة مماثلة، أو استحواذها عليها.
- Article 26
The article requires a finance company to obtain SAMA's approval to open a branch, agency or office inside or outside the Kingdom, or to close any of them.
يجب على شركة التمويل الحصول على موافقة المؤسسة عند فتح فرع، أو وكالة، أو مكتب داخل المملكة أو خارجها، أو إغلاق أي منها.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.