Saudi Arabia’s Financial Regulation Landscape: New Developments and Innovations

In the dynamic financial scene of the Kingdom of Saudi Arabia, regulatory bodies are working diligently to establish a favorable environment for investor confidence, prudent risk management, and economic growth. Saudi Arabian Central Bank (SAMA) and the Capital Market Authority (CMA), respectively, govern different sectors of the financial industry.

The Role of Regulatory Bodies: SAMA and CMA

The Saudi Arabian Central Bank (SAMA) is responsible for regulating banks, insurance companies, payment service providers, and finance companies. On the other hand, the Capital Market Authority (CMA) oversees securities business and the Saudi capital markets.

Both SAMA and CMA are integral components of the Saudi Arabian government’s efforts to modernize the financial sector, as outlined in the [Financial Sector Development Program] (https://www.mof.gov.sa/business-en/Sectorial-Programmes/Financial-Sector-Development-Program) - a significant aspect of Saudi Arabia’s [Vision 2030] (https://www.visionsaudi2030.gov.sa/en/overview).

Recent Developments in Saudi Arabia’s Financial Regulations

SAMA and CMA are consistently introducing regulations aimed at promoting innovation, diversity, and supporting the private sector within the framework of the Financial Sector Development Program. Some of the recent developments are:

SAMA’s Regulatory Sandbox

Since its inception in February 2019, SAMA’s Regulatory Sandbox has provided a unique platform for local and international companies to experiment with new financial technologies, like e-wallet services and P2P transfers, in the Saudi financial services market. This initiative aims to improve the competitiveness and efficiency of the financial sector.

CMA’s Fintech Lab

In 2020, the CMA introduced the Fintech Lab, enabling start-ups to test their innovative fintech products related to the capital market within defined parameters and timeframes. This initiative supports the growth of the fintech industry and strengthens the Saudi stock exchange’s position as a technological hub.

Direct Foreign Investment

Building on the 2019 QFI Rules published by the CMA, the 2020 Instructions for Foreign Strategic Investors permitted majority foreign ownership of Saudi-listed companies with the CMA’s approval - a substantial step towards attracting greater foreign investment in the Kingdom.

Derivatives Market and Cross-Border Investments

The CMA’s establishment of a specialized derivatives market with a Saudi clearinghouse in 2020 and the signing of a cooperation agreement between the Securities Depository Center (Edaa) and Euroclear Co. in 2021 promote cross-border investments and offer improved access for foreign and local investors in the local stock market.

Regulatory Compliance

Despite these innovations, regulatory compliance remains a crucial aspect of business success as the financial sector continues to evolve. SAMA and CMA are also introducing new regulations for short selling and securities lending to ensure fairness and transparency in the market.

Z&Co.’s Financial Regulatory Lawyers: Navigating the Complexities

As the financial regulatory landscape in Saudi Arabia evolves, Z&Co.’s financial regulatory lawyers are well-equipped to advise local and foreign financial institutions, payment service providers, fintech companies, and insurance companies on the latest developments and intricate regulatory issues. With extensive experience in the field, we provide clients with valuable insights and assist them in navigating the ever-changing financial landscape in Saudi Arabia.