Some 10 foreign banks have been licensed to operate in Saudi Arabia, claims Muhammad Al-Jasser, deputy governor of the Saudi Arabian Monetary Agency (Sama). “The banks have also been authorised to open branches in the country,” he says.
Al-Jasser says there is no plan at the moment to license new Saudi banks in addition to the existing 11. “We now have the necessary number of banks to meet the country’s requirements. New banks can be opened when there is a huge new supply of capital,” he adds.
The newly licensed foreign banks include BNP Paribas, JPMorgan, Deutsche Bank, National Bank of Kuwait, National Bank of Bahrain, Emirates Bank, Gulf International Bank, State Bank of India and National Bank of Pakistan. BNP Paribas, which opened its branch in Riyadh recently, was the first European bank to enter the Saudi market as a 100% foreign bank.
BankMuscat has indicated that it has received Sama approval to open offices and in early 2006 its first branch will open in Riyadh.
The banking sector in the kingdom, claims a Sama official, has remained a force to reckon with in the Middle East by virtue of the presence of foreign banks since 1926. “It is thus a continuation of the old policy that predates the birth of the World Trade Organisation,” he says.
Al-Jasser said Saudi Arabia was not forced to open new Saudi or foreign banks because of its accession to the WTO. “The opening of new branches is based on the country’s need, not on WTO membership,” he added.
He describes banking services in the kingdom as one of the best in the world. “Some of the products they offer excel their counterparts in Europe,” he adds. He adds that competition in the sector will help improve banking services. He emphasises that the WTO would have no negative effect on Saudi banks. “The kingdom intends to develop its banking sector and offer innovative products,” he adds.
Saudi Arabia was officially admitted to the WTO in November, becoming its 149th member. Foreign licensed banks can now set up branches and existing joint venture banks can increase their foreign equity to 60% from 40% in accordance with WTO regulations.
Foreign banks, however, have to follow the banking control law, company law and foreign investment law of the kingdom.
The 11 Saudi banks – National Commercial, Riyad, Samba, Rajhi, Saudi-British, Saudi Fransi, Arab National, Al Jazira, Saudi Hollandi, Albilad and Saudi Investment – made a combined third quarter profit of SR19.6bn this year.