Banks in the Kingdom of Saudi Arabia

Banks in the Kingdom of Saudi Arabia are financial institutions specialized in providing exchange, finance, and investment services to individuals and companies in the Kingdom. The Saudi banking sector is about seventy years old, and the Saudi Central Bank specializes in supervising banks and monitoring their transactions, represented by the General Department of Banking Control.

How banks began their operations in the Kingdom

Since 1926, the Netherlands Trading Society has been the first foreign financial institution to operate exchange services within the Kingdom. This institution served as the foundation for what is now known as the Alawwal Bank, formerly the Saudi Hollandi Bank.

The first commercial bank in Saudi Arabia was established in 1953 under the name Al-Ahli Commercial Bank. It is the largest financial institution in the Kingdom, and one of the most prominent regional financial forces. Several Saudi banks were launched after its establishment, reaching thirty-six Saudi and foreign banks, including eleven local banks, three local digital banks, and twenty-two branches of foreign banks in 2022.

The list of Saudi banks includes Al Rajhi Bank, Aljazira Bank, Riyad Bank, AlBilad Bank, Alinma Bank, Banque SaudiFransi, First Saudi Bank, Saudi Investment Bank, Arab National Bank, Saudi National Bank and Gulf International Bank – Saudi Arabia.

In 2021, two local digital banks were licensed, which are: STC Bank with a capital of 2.5 billion Saudi Riyals and the Saudi Digital Bank with a capital of 1.5 billion Saudi Riyals. In 2022, 360 Bank was licensed with a capital of 1.6 billion Saudi Riyals.

In order to enhance banking technologies, the Central Bank licensed three companies specialized in the field of financial technology in 2023. Forty-five financial technology companies have been licensed in total by the Central Bank, eighteen of which were licensed after the success of the trial in the regulatory sandbox.

Banking work regulations in Saudi Arabia

The Kingdom's banking sector has been regulated since 1952. This is fifty years after the Kingdom's foundation, when the Saudi Arabian Monetary Agency (currently the Saudi Central Bank) was established, which was concerned with the government’s banking business, as well as the monitoring and supervision of banking financial institutions in the Kingdom.

The bank chose Jeddah, in the west of the Kingdom, for its official headquarters, and opened its branches in the cities of Makkah, Medina, Dammam, Taif and Riyadh. After nearly seven decades of practicing its banking and controlling functions, a royal decree was issued in 2020 to change the name of the Saudi Arabian Monetary Agency to the "Saudi Central Bank" and approve the Central Bank Law, while maintaining all the powers, tasks, monitoring and supervising roles of the previous institution.

Within the developmental framework of banking business in the Kingdom, the Saudi Central Bank issued in 2022 the Open Banking Framework, which is one of the most important outcomes of the Financial Sector Development Program. The framework includes a set of legislation, regulatory guides and technical standards, in accordance with international best practices. This will enable banks and financial technology companies to provide open banking services in the Kingdom.

Rules and regulations of the Saudi Central Bank

The Kingdom's banks are subject to several laws, regulations and rules issued by the Saudi Central Bank. The oldest of which is the Banking Control Law issued in 1966, while the most recent is the Anti-Money Laundering Law issued in 2017. Others include the Saudi Arabian Monetary Agency Law, the Monetary Law, the Anti-Counterfeiting System, the Credit Information Law, the license fees regulation for money exchanging businesses, and the rules regulating money exchanging businesses.

Services provided by banks in Saudi Arabia

Banks in the Kingdom provide traditional commercial services, and Islamic banking services, which are transactions compatible with the Islamic law and distinguished with its low interest. Each bank designates a legal board that oversees and legislates its transactions.

The banking services in both types generally include many sectors: retail banking; corporate banking; SMEs; investment,finance, and brokerage; and treasury.

The Saudi banking sector witnessed mergers among several major banks in the Kingdom, such as the merger of SABB Bank and Alawwal Bank in 2019, which required transferring products, services, and customers from Alawwal Bank to SABB Bank. In 2021, the National Commercial Bank and Samba Financial Group legally merged, which led to the provision of their services through one financial institution under the name of the Saudi National Bank (SNB Alahli).

The executive program of Saudi Vision 2030 (the Financial Sector Development Program), which was announced in 2017, covers the banking sector as one of the national economy's pillars. It aims at developing the Kingdom’s economy and diversifying sources of income by encouraging financing, saving and investment. According to the program plan, it seeks to increase the bank financing shares for SMEs to reach 6% by 2020. In addition to raising the shares of mortgages in bank financing to reach 16%.

The Islamic finance industry in the Kingdom has witnessed several developments that positioned the Kingdom at the global forefront in terms of the volume of Shari'a-compliant financial assets across various financial and commercial sectors. The total assets of Islamic financial services in the banking, Sukuk, insurance and investment fund sectors in the Kingdom in 2021 reached about USD800 billion, thus representing approximately28% of the total Islamic financial assets globally. On the other hand, the key indicators of the Islamic banking sector in the Kingdom have seen a rapid increase, as the total Sharia-compliant financing surpassed USD430 billion.

The connection of banks in the Kingdom to the Saudi Payment Network

Banks in the Kingdom are linked to the Saudi Payment Network (SPAN), which was established by the Saudi Arabian Monetary Agency (the Saudi Central Bank currently) in 1990 to provide a national network of ATMs and point-of-sale devices connected to a central payment network. This will redirect the executed operations to the banks that issued the card in order to activate electronic dealing in banking systems.

During 2016, the electronic payment service using bank cards for purchases via smartphones was made available inside and outside the Kingdom under the name of Mada Pay service, which is linked to the Gulf Payments Network and international companies, such as Visa and MasterCard.

The responsibility of raising awareness and providing guidance in the Kingdom's banking sector lies with the Saudi Banks Media and Awareness Committee, which is subordinate to the Board Chairmen Committee of Saudi Banks. The committee was established in 2006 to create and promote a financial banking culture among the members of society to educate them on financial options and products, disseminate information related to banking affairs, raise awareness of the latest updates in the local and international banking sectors, and combat types of financial fraud.