الدليل الإرشادي لإدارة القروض محتملة التعثر

1.1 Purpose of document

The purpose of this document is to support the Saudi banking sector in their ongoing efforts to accelerate the resolution of non-performing loans (NPLs) associated with large corporates, micro, small and medium-sized enterprise sector. This document seeks to reflect the local and international best practices on dealing with problem loans, these guidelines also seek to take into account the specifics of Kingdom of Saudi Arabia's (KSA) economic and banking sector structure and the extensive experience accumulated by KSA banks in dealing with their

2. Problem Loan Prevention & Identification

2.1 Early warning signals as a tool for preventing NPLs

One of the keys to maintaining acceptable levels of Non-Performing Loans lies in the ability to identify potential payment difficulties of a borrower as early as possible. SAMA views instituting an effective framework within regulated entities as a mandatory requirement. The sooner the problem is identified, the easier it will be to remedy it. Early warning signals (EWS), fully integrated into the bank's risk management system, is a crucial tool to identify and manage upcoming

2.3 Stages of EWS process

1. Identification:

Early warning signs are indicators that point to potential payment difficulties. These indicators could be alienated into five broad categories:

i. Economic environment, ii. Financial indicators, iii. Behavioral indicators, iv. Third-party indicators, and v. Operational indicators.

The main aim of this list is to produce a comprehensive set of signals that provides the bank an opportunity to act before the borrower’s financial condition deteriorates to the point of default. Each of these categories has been explained below from sections