Financial Regulations

Financial Regulation

Financial regulation in Saudi Arabia is divided between the Saudi Arabian Monetary Authority (“SAMA”) for banks, insurance companies, 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 diversifying the financial sector and making 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, which provides for authorisation of local and international companies to test new technologies in the financial services market, such as E-wallet services and peer-to-peer (P2P) transfers. The CMA has likewise established its financial technology experimental permits;
  • The CMA’s Rules for Qualified Foreign Investors (“QFIs”), permitting direct foreign investment in the Saudi stock exchange for the first time;
  • Building on the QFI Rules, the CMA’s Instructions for Foreign Strategic Investors, which permits majority foreign ownership of Saudi-listed companies with the CMA’s consent;
  • The proposed launching of a specialist derivative market by the CMA by the end of 2020;
  • The signing of a cooperation agreement between the Securities Depository Center (Edaa) and Euroclear Co. to facilitate foreign and local investors in the local stock market; and
  • 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 with local and foreign financial institutions and investors.