The banking sector in Saudi Arabia is regulated by SAMA. In order to carry on banking business (a term that is widely defined by SAMA and includes deposit taking, foreign exchange transactions, and “other banking business”) in the Kingdom of Saudi Arabia, an entity must be licensed by SAMA and be either a local joint stock company or a branch of a foreign bank.

Banking business further includes investment banking activities, which constitute securities business under Saudi regulation and are therefore separately governed by the CMA, but excludes insurance and finance company activities, which are separately regulated and licensed by SAMA. These investment banking activities must be carried on by a non-bank joint stock company that is licensed by the CMA.

There are currently 11 Saudi-incorporated banks, including The Saudi British Bank (31% owned by HSBC), Banque Saudi Fransi, and The Saudi National Bank. Banks from the United Arab Emirates, Bahrain, Kuwait, Oman, Germany, Switzerland, France, the United States, Pakistan, Turkey, China, Qatar, and Japan are currently licensed to operate in the Kingdom of Saudi Arabia.

Recent years have seen a consolidation in the banking sector in the Kingdom of Saudi Arabia. In March 2021, for example, SABB and Alawwal bank completed their merger, with SABB being the successor entity in a transaction that created the third largest bank in the Kingdom of Saudi Arabia by assets. Additionally, in April 2021, the National Commercial Bank and Samba Financial Group SJSC completed the biggest merger in the Middle East to create The Saudi National Bank.

It is common practice for foreign banks that are licensed in foreign jurisdiction to lend from offshore to Saudi projects or corporations. This appears to be permitted by SAMA, provided the foreign banks concerned do not carry on deposit-taking or marketing activities in the Kingdom of Saudi Arabia or otherwise have any form of presence in the Kingdom of Saudi Arabia.

The Z&Co. team’s experience on banking matters includes:

  • Licensing of banks and foreign ownership;
  • Internal governance provisions of banks, including outsourcing;
  • Bank lending, including bilateral and syndicated loans;
  • Projects, including sponsors, lenders, equity financiers, borrowers, and export-credit agencies; and
  • Islamic finance.