1. SAMA Approach to Foreign Banks Branches (FBB) Regulation
1. These SAMA regulations are applicable to all FBBs operating in the Kingdom of Saudi Arabia (KSA).
2. The regulations are issued in accordance with the authority vested in SAMA under the Charter of Saudi Arabian Monetary Authority -issued via Royal Decree No. 23 dated 23/5/1377 H, which entrusts SAMA to supervise and regulate commercial banks, and to set relevant rules whenever deemed necessary; and the Banking Control Law - issued via Royal Decree No. M/5 dated 22/2/1386 H Article 16 (3), which sets SAMA as the legislative body responsible for exercising regulatory and supervisory control over banks, issuing general rules and overseeing that all banks comply and effectively implement the relevant laws and regulations.
3. SAMA requires all FBBs to comply with the Banking Control Law (BCL), its prudential requirements, and other relevant laws and regulations as applicable to all local and foreign banks.
4. In addition to these FBB-specific prudential requirements, FBBs are also required to comply with the requirements of SAMA circulars covering conduct regulations and standards as issued by SAMA, for all banks.
1.1. Significant Retail Activities
5. SAMA has additional requirements for FBBs that take significant retail-banking deposits.
6. SAMA considers retail banking activities to be significant where an FBB:
i. Has more than SAR 5 billion of retail and Micro, Small and Medium-sized enterprises (MSME)1 account balances or more than 1,000 retail and MSME account holders; or
ii. Undertakes deposit activity where the total number of branches exceeds five (5).
1 As per SAMA MSME definition
1.2 Wholesale Activities
7. SAMA has additional requirements where wholesale only foreign bank branches are systemically important. Wholesale only foreign bank branches are those that are not engaged in significant retail activities as defined in 6 above.
8. In assessing whether a branch is systemically important, SAMA looks at whether the overall KSA footprint of the branch exceeds an average of SAR 10 billion total gross assets. The SAR 10 billion threshold is only indicative and SAMA will also take into account the scale of provision of Critical Economic Functions (CEFs) the branch undertakes in KSA.
9. For the purpose of these regulations, CEFs are defined as activities, services or operations the discontinuance of which is likely to lead to the disruption of services that are essential to the real economy due to the size, market share, external and internal interconnectedness, complexity or crossborder activities of the FBB, with particular regard to the substitutability of those activities, services or operations.
10. Wholesale only FBBs will be considered as being systemically important if they undertake the CEFs under A and B below. SAMA may also designate a Wholesale only FBB if its activities under C below are considered systematically important by SAMA. (A) Payments, Cash, Settlement, Clearing, Custody Payment services Cash services (B) Lending Securities settlement services CCP clearing services Custody services (C) Capital Markets Derivatives held for trading – OTC Derivatives held for trading – non-OTC Secondary markets / trading ( held-for-trading-only) Primary Markets / underwriting