Financial Regulations

Financial Regulations

Oversight of the financial regulation in the Kingdom of Saudi Arabia is divided between the Saudi Arabian Central Bank (“SAMA”) for banks, insurance companies, payment service providers and finance companies and the Capital Market Authority (“CMA”) for securities business and the Saudi capital markets.

SAMA and the CMA, respectively, are constantly developing regulations to ensure a business environment that fosters both investor confidence and prudent risk management by regulated entities and that encourages economic growth and innovation. One of the 12 executive programs consolidated from Vision 2030 is the Financial Sector Development Program, whose goal is to diversify the financial sector and to make it more efficient in order to enable financial institutions to support the growth of the private sector.

Some examples of recent developments that demonstrate these trends are:

  • SAMA’s regulatory sandbox, launched in February 2019, providing a framework for local and international companies to test new technologies in the financial services market, such as E-wallet services and peer-to-peer (P2P) transfers.
  • Similarly, the CMA has established a fintech lab in which start-ups may deploy and test their innovative fintech products related to the capital market within specified parameters and timeframes.
  • In addition, the CMA published the Rules for Qualified Foreign Investors (“QFI Rules”), permitting direct foreign investment in the Saudi stock exchange for the first time.
  • Building on the QFI Rules, the CMA issued the Instructions for Foreign Strategic Investors, which permits majority foreign ownership of Saudi-listed companies with the CMA’s consent.
  • The launch of a specialist derivatives market with a Saudi clearinghouse by the CMA in 2020.
  • The signing of a cooperation agreement between the Securities Depository Center (Edaa) and Euroclear Co. promote cross-border investments and to facilitate access for foreign and local investors in the local stock market.
  • New Tadawul regulations for short selling and securities lending.

The Z&Co. team, working with Linklaters, has wide experience advising on financial regulatory matters, including advice to local and foreign financial institutions, payment service providers, fintech’s and insurance companies.