JEDDAH, 30 November 2006 — The Kingdom’s banking regulator has ordered a temporary suspension of the plan to issue new licenses to foreign banks to operate in the country.
“This temporary decision will be in force until the completion of the evaluation process of the licenses issued so far,” Hamad Al-Sayari, governor of the Saudi Arabian Monetary Agency (SAMA), said yesterday. Several foreign banks, including Deutsche Bank, PNB Paribas and Kuwait National Bank besides some Indian, Pakistani, European and American and Arab banks have been issued licenses since 2001.
Commenting on the latest decision, Ibrahim Abdullah Al-Sibaie, a founding member of Bank Albilad and member of the board of directors of Bank AlJazira, told Arab News: “This decision is essential in order to evaluate the experiment of permitting foreign banks in the Kingdom and know the extent of its advantage to the Saudi economy.” He also pointed out that the presence of large number of banks in the Saudi market will make an adverse impact on the profitability of the domestic banks as the customers will be distributed amidst a greater number of banks. “The banks of the countries from where large number of people are working in the Kingdom aim to obtain banking licenses here in order to attract the deposits of the workers of their respective countries,” he said.
He said there are more than 20 countries with large number of workers in the Kingdom. They include India, Philippines, Pakistan, Egypt, Yemen, Sudan, Syria, Lebanon, Jordan, Bangladesh, Morocco, and Indonesia. Banks of these countries want to enter the Saudi market. Around seven million expatriates are working in the Kingdom. They used to sent approximately more than SR80 billion through Saudi banks and other channels of foreign remittance as there is no restriction in the Kingdom in foreign workers’ remittance.
Khaled Al-Harithy, director general of the Al-Harithy for Financial Consultancy in Jeddah, said: “The decision to suspend the issue of new licenses temporarily or permanently to foreign banks intending to operate in the Kingdom will not affect the movement or performance of the stock market at present.” It may make some impact in future if the banks that have been issued with the license actually enter the Saudi market particularly if the foreign banks are allowed to enter the Saudi stock market, he said.
