Introduction to Early Closure Charges

As per Saudi Arabian Monetary Agency - SAMA regulation, when a financing is closed before maturity, the bank perceives early closure charges, whose value will be considered based on three future profit installments.

This early closure charge will be paid or collected from the customer.

• For an Ijarah contract, the early closure charge will be collected from the customer.
• For a Murabahah financing, the early closure charge will be paid to the customer.

The Early Closure Charges functionality provides the following benefits:

• It provides flexibility to the bank to collect or pay the early closure charges as entailed by SAMA regulations.
• It covers the regulatory requirement for both Ijarah contracts and Murabahah financing.
• The parameter controlling the number of future profit installments to be considered for the early closure charges calculations can be configured and amended in case the regulation changes in the future.
  • The setup can be done at the product level or defaulted and applied to all products.

Minimum and Maximum Rate

This functionality relates to calculating the maximum and minimum interest rates for the product. The rates will be recorded based on Sibor rates. Also, it relates to the calculation of the maximum and minimum rate allowed at the time of revision.

Temenos Transact allows configuration of the maximum and minimum interest rates at the product level. It can be configured in the interest product condition and attached to the product.

Customer Deposits

This functionality explains the solution related to how the rates used for the staff deposit and for collateral are changed when the deposits are not for staff and the collateral is no longer attached to the deposits.

Banks can open deposit accounts for customers and also for its own staff. There are various types of deposits, the deposits may vary based on the tenor, interest rate, amount, etc. Based on the customer, amount, tenor etc. the interest rate can be different. The bank will also provide facilities like partial withdrawal or early withdrawal or pre closure i.e. when the whole amount or the partial amount are withdrawn before the maturity date. The deposit amount can be renewed when the maturity date is reached.

The details of the special rate like Treasury Ref No and Dealer Code can be captured in the user defined property class XSPECIAL.RATE.DETAILS.

The various types of products can be configured in Arrangement Architecture based on the products that the bank offer to its customers and staff.

Auto Ijara

SAMA requires all the banks to start offering a partial early settlement to its Auto Ijarah customers hence this functionality is required to be built in the existing system since this offering is a part of unified Auto Ijarah agreement so the bank will be committed to offer this facility to customers.

This functionality facilitates the calculation of the Partial Early Settlement (PES) charges as per SAMA regulation. The present SAMA regulation entails collecting the immediate next three future profit instalments as PES charge when an advance payment is initiated. The functionality also covers some additional validations for allowing Partial Early Settlement (PES) transactions.