The specifics of banking in Saudi Arabia

Saudi Arabia boasts a sophisticated and modern banking infrastructure, considered one of the strongest in the Middle East. The banking sector is developing with an emphasis on innovation, a harmonious combination of traditional Islamic banking principles and advanced technology, which provides a reliable financial environment.

Banking System of Saudi Arabia

The banking sector of Saudi Arabia plays a critical role in the country's economic transformation. As Saudi Arabia moves away from oil dependence and focuses on modernization, the efficiency of its banks continues to improve. Banks in Saudi Arabia, including the leading ones, adhere to Islamic banking principles, which distinguish their operations from banks in other countries. They offer services such as lending, deposits, and investments, but operate in strict compliance with Sharia law.

The central bank of Saudi Arabia, known as the Saudi Arabian Monetary Authority (SAMA), was established under the SAMA Charter, Royal Decree No. M/23 (15 December 1957). The objectives of SAMA are to issue, support and consolidate the Saudi riyal, to be the central bank for the government and to supervise banks and money changers. 

Banking in Saudi Arabia is regulated by the Banking Supervision Regulations, Royal Decree No. M/5 of 11 June 1966. Any entity carrying out banking activities must be licensed under the Banking Supervision Regulations. Banking activities include, but are not limited to, receiving money into a current or term deposit account, opening current accounts, opening letters of credit, issuing letters of guarantee and paying and collecting cheques.

The Saudi Arabian government has allowed increased foreign participation in the banking sector in recent years. SAMA has licensed a number of new foreign banks to operate in the country, including Deutsche Bank, JP Morgan Chase NA and Industrial and Commercial Bank of China (ICBC). A number of additional foreign licensed banks participate in the Saudi market as investors or asset management advisors.

In 2021, SAMA introduced a new Instant Payment System (Sarie), which enables instant 24/7 money transfers between local banks.

There are 36 Saudi and foreign commercial banks in the Kingdom, and 3 digital banks.

Islamic Banking

Saudi Arabia has the largest Islamic banking funding base of any country, accounting for 78% of the total sector. Nearly 30% of all Islamic banking activity in the GCC takes place in the Kingdom. Conventional banks are required by law to operate in accordance with Islamic principles.

The Islamic banking framework in Saudi Arabia focuses on several key elements to ensure that banks operate in a Sharia-compliant manner while remaining financially sound. These include:

• Sharia compliance monitoring. This is an ongoing process where products, services and contracts are regularly reviewed to ensure they comply with Islamic standards. Sharia auditors and compliance officers work closely with the bank’s management to identify and address any potential issues.
• Risk management. Like conventional banks, Islamic banks must manage financial risks, but they do so in a way that is compliant with Sharia principles. For example, Islamic banks avoid high-risk speculative investments, focusing instead on real, tangible assets. This ensures a more stable and secure banking environment.
• Transparency and disclosure. Transparency is crucial in Islamic banking. Banks must clearly disclose the terms of contracts to customers, including profit margins, fees and the nature of the assets involved. This is in line with the Islamic principle of preventing exploitation (zulm) and ensuring fairness in transactions.
• Education and Training Compliance with Shariah principles requires a deep understanding of both Islamic law and modern finance. Islamic banks invest heavily in training their employees and educating their customers about the unique aspects of Shariah-compliant products.

Digital Banking

Saudi Arabia has recently become the largest digital banking market in the Middle East and North Africa. According to a study by ArabNet, more than three-quarters of banking customers access banking services online. While 76% of Saudi banking customers use digital platforms, 60% use online and mobile apps.

Banking services in the Kingdom make it easy to manage your accounts online or through smartphone apps. Almost every major bank has an online presence thanks to SAMA’s e-promotion. Residents of Saudi Arabia can also use the Mada electronic payment system.

Saudi Arabia has undergone a transformation in its banking and fintech sectors over the past few years. The country is now becoming a leader in digital banking. The ambitious Vision 2030 program led by Crown Prince Mohammed bin Salman has become the center of digital transformation, pushing the country to a leading role in the global economy. Vision 2030 places the banking sector at the center of transformation and mass adoption of digital services and this has already led to the first stage of digital transformation, with further acceleration in fintech being a key goal.

The growth of fintech in Saudi Arabia is supported by government initiatives to encourage innovation and investment. Fintech companies are transforming payment systems, lending, and investment platforms thanks to financial government support. In addition, regulators have introduced a complete framework for the fintech sector that prioritizes consumer protection, cybersecurity, and healthy competition. This both improves customer service and levels the playing field.

Online banking, mobile apps and digital wallets are now an integral part of the banking experience, offering customers a more convenient way to make transactions and manage accounts. Improving customer experience has become a key priority for banks, with cutting-edge technologies such as AI-powered chatbots and personalized financial recommendations using data analytics. Not only do these innovations streamline processes, they also drive customer loyalty.

Opening a bank account is now available online, eliminating the need to visit a bank in person. Customers can easily sign up through banking apps on their phones or websites, opening an account in minutes. This means that financial inclusion has expanded through mobile banking, giving access to financial services, credit and insurance to those who were previously excluded. A key part of the program’s success is that digital transformation is not limited to urban areas, but extends to rural areas and previously underserved populations.

In June 2021, a resolution was issued approving the licensing of two local digital banks to position Saudi Arabia as a global financial hub. The companies received their licenses after transforming “stc Pay” into a local digital bank with a share capital of SAR 2.5 billion, which will eventually allow it to conduct banking activities in Saudi Arabia (stc Bank). Also, several companies and investors have joined forces to establish a local digital bank (Saudi Digital Bank) with a charter capital of SR1.5 billion to carry out banking activities in Saudi Arabia.

The Council of Ministers issued another resolution on February 15, 2022, approving the licensing of a third digital bank known as D360 Bank, formed by an alliance between several investors covering businesses and individuals and the Public Investment Fund (PIF). The bank is managed by Derayah Financial Company and has a share capital of SAR 1.65 billion. These banks offer new financial services that are in line with the latest banking technologies.

Largest Banks in Saudi Arabia

The Saudi Arabian banking sector is dominated by a few large players that control a significant portion of the country's assets.

• Saudi National Bank (SNB)

Saudi National Bank is the largest commercial bank in Saudi Arabia. Formed by the merger of National Commercial Bank and Samba Financial Group, SNB controls the majority of the country's financial assets. The bank's headquarters are in Riyadh.

The bank has more than 500 branches and serves approximately 11 million customers. SNB is a key player in the asset management sector, with SNB Capital managing assets of over US$67 billion.

Islamic banking products at SNB are developed to world-class standards in accordance with the provisions of Islamic Shariah under the supervision of the bank’s Shariah Committee, where SNB strives to ensure that all Islamic products and services offered to customers are fully compliant with Islamic Shariah.

• Al Rajhi Bank

Founded in 1957, Al Rajhi Bank is not only the second-largest lender in Saudi Arabia, but also the world’s largest Islamic bank by capital. It has over 521 branches in the country and a large customer base of over 12 million.

The bank carries out banking and investment activities in accordance with the provisions of Islamic Sharia for individuals and legal entities, both within the Kingdom of Saudi Arabia and abroad. Its head office is located in the capital, Riyadh.

Al-Rajhi Bank's banking operations cover five sectors: retail banking, corporate banking, SME sector, treasury sector and international business sector. The bank is associated with a group of companies and branches inside and outside the Kingdom that offer a variety of business services.

The bank also provides a comprehensive and integrated investment portfolio through investment funds that are compliant with Islamic Sharia. Investment funds are managed by fund managers and offered through a wide network of investment centers and investment experts across the Kingdom.

• Riyadh Bank

Riyadh Bank is one of the oldest public banks in Saudi Arabia, founded in 1957. It has over 340 branches across the country and operates internationally, with a branch in the UK and an office in Singapore. The bank's profitability has steadily increased, driven by an increased focus on corporate finance and investment banking.

• Saudi British Bank (SABB)

Founded in 1978, Saudi British Bank is associated with HSBC Holdings Plc. The bank offers a wide range of services, including private banking, commercial lending and Islamic banking. In recent years, SABB has focused on expanding its ESG (Environmental, Social, and Governance) portfolio, aiming to increase green lending and investments.

• BSF

BSF (Banque Saudi Fransi) was founded in 1977 and is associated with Credit Agricole, France's second-largest bank. The bank serves corporate, retail and investment banking clients, with a particular focus on asset management through its subsidiary Saudi Fransi Capital. It has significantly increased its profits by expanding into new markets and focusing on digital services.

In the area of Islamic banking, Banque Saudi Fransi has made significant improvements in product development and service, including upgrading its branches to comply with Islamic Shariah regulations and providing alternative products available to businesses and individuals, including investment and global market services.

• Alinma Bank

Founded in 2006, Alinma Bank is a relatively new player in the Saudi Arabian banking sector, but has quickly risen to become one of the leading banks in the country. The bank has a capital of SR20 billion. Its headquarters are located in the capital, Riyadh.

Banking operations are supervised by the Banking Supervision Department of the Central Bank of Saudi Arabia.

The bank was established by three government entities: the Public Investment Fund, the Saudi Pension Agency (before its merger with insurance) and the General Organization for Social Insurance.

Alinma Bank has 104 branches throughout the Kingdom, providing banking services in the retail, corporate, investment, brokerage and treasury sectors. These branches are supported by more than 1,500 ATMs, 108 digital zones and 125,247 POS terminals in the country.

The bank serves 3.9 million customers and conducts operations in accordance with Islamic Sharia. For this purpose, it has designated a Sharia body consisting of specialists in financial transactions and economic jurisprudence. He is responsible for explaining the regulations and controls and monitoring their implementation.

Alinma Bank has five wholly owned subsidiaries with the center of their activities in Saudi Arabia: Alinma Investments, Tanweer Real Estate Company, Alinma SPV Limited, Alinma Isnad Company and Saudi Financial Technology Company.

• Arab National Bank (ANB)

Arab National Bank has been a mainstay of Saudi banking since 1979. With a wide range of services serving both retail and corporate clients, ANB has steadily increased its assets and market share. It has a strong presence in the mortgage and consumer finance segments, both of which have contributed to its robust profitability.

• Bank Albilad

Bank Albilad, founded in 2004, is one of the leading banks in Saudi Arabia specializing in Islamic banking products. The bank has experienced rapid growth, expanding to over 150 branches and improving its money transfer services through its subsidiary Enjaz Payment Services Company. Bank Albilad’s impressive profit growth is driven by the growing demand for retail banking services, strengthening its position among the country’s leading financial institutions.

• Saudi Investment Bank (SAIB)

SAIB (Saudi Investment Bank), founded in 1976, is one of the leading banks in Saudi Arabia. Saudi Investment Bank provides a full range of banking services to corporations and individuals, in addition to investment services. In addition, the bank carries out operations in financing industrial sectors, as well as trade finance, which includes import and export. This reflects the bank's commitment to supporting and developing the private industrial and commercial sector.

In 2006, the Islamic banking brand "al-Asalah" was launched, providing products and services compliant with Islamic Sharia. Saudi Investment Bank also offers conventional and Islamic banking services to individuals and corporations, as well as the government, semi-government and private sectors.

• Bank Al Jazeera

Bank Al Jazeera, founded in 1975, is one of the leading banks in Saudi Arabia, offering a wide range of Sharia-compliant banking products and services. The bank has successfully expanded its customer base by focusing on SME financing, Islamic banking products and digital banking solutions, cementing its position as a key player in the country's banking sector.

Types of Bank Accounts

There are several different types of bank accounts in Saudi Arabia, and they may vary from bank to bank.

• Current Account

A current account allows you to carry out traditional banking transactions, including depositing or withdrawing cash, issuing cheques, paying and receiving cheques, and paying regular expenses. You can also open a joint account.

• Savings or Deposit Accounts

Savings accounts allow you to save money for any given period of time with a profit margin on the money deposited in the account. There may often be limits on the number of withdrawals you can make. Savings account holders are usually not allowed to request checkbooks.

• Term Deposit Accounts

Term deposit accounts are for people who want to make their money work for them and can put aside significant amounts for a certain period of time. They usually have a higher profit margin than a savings account and are usually tied to a certain fixed deposit amount and a certain period of time.

• Women's Accounts

Many banks in Saudi Arabia provide exclusive and customized banking services for women through special bank accounts.

• Children's Accounts

Parents can open bank accounts for their children. They usually have limits on the number of transactions that can be made.

• Investment Accounts

Many banks in Saudi Arabia offer investment services. You can open an investment account by signing an investment agreement for a fixed period of time with the bank. Such agreements cover the management of your funds with a minimum guaranteed return and usually require a minimum investment balance.

• Offshore Accounts

Many expatriates open offshore accounts when banking in Saudi Arabia, as this can be the most effective way to save, invest, and manage money while abroad. Asset managers and brokerage firms offer these services, but banks in Saudi Arabia also have links to offshore institutions.

How to open a bank account

Depending on the type of account you want to open, the process can take several weeks and require different sets of documents.

For a resident, the basic requirements for opening a personal savings or current account are:

• Your original passport and a copy of it.
• A copy of your Iqama (residence permit) or visa page proving that you are a legal resident of Saudi Arabia.
• A No Objection Letter from your employer or sponsor (called a NOC). This should state your salary in Saudi Arabia to show the amount that will be paid into the bank regularly.
• Some banks may ask for a copy of your lease agreement to establish your residential address.
• Two to six passport-sized photographs in the specified format (check with the bank for the required format).
• A completed and signed bank account application form.

There are some things to be aware of when opening a bank account in Saudi Arabia. For example, the bank may not want to open an account for you unless your company is registered with them. So, this may actually force you to open an account with your employer's bank. The bank may also decide to conduct a background check before allowing you to open an account.

How to Open a Corporate Bank Account

Companies operating in Saudi Arabia are required to open a capital account during the company registration process and deposit the required paid-up share capital. This capital account does not require the appointment of a bank subscriber and cannot be used for business transactions.

It usually takes about 8-12 weeks before your bank account becomes operational. You will need the following documents:

• License (if the activity is subject to licensing).
• Certificate of incorporation.
• Share certificates.
• Memorandum of association and articles of association.
• Board of directors resolution authorizing a company officer to open an account.
• Copies of passports and residence visas for shareholders and authorized persons.

What to do if you are denied a bank account in Saudi Arabia

SAMA regulations stipulate that banks cannot refuse to open accounts unless certain conditions are met. These conditions usually relate to whether foreign nationals pose a risk to the bank; for example, those with a criminal record or who are on an international wanted list. However, in such cases, the foreigner will initially be refused a residence visa.

On the other hand, the bank may refuse to accept you as a client if you do not provide documents proving your identity, your employment status and the nature of your work. In addition, clients may be refused for the following reasons:

• If another bank has blocked your account due to suspicious activity.
• You cannot verify the source of funds.
• You repeatedly violate the minimum account balance requirements or, in the case of corporate accounts, the minimum account turnover.
• If you are on the list of persons subject to restrictions.

However, if you are refused to open a bank account, you can contact the SAMA Consumer Protection Department. You can file a complaint by phone, letter, email or in person. Once you have filed a complaint, you will receive a complaint number which you must use in all future communications with SAMA.