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  • 3. Minimum Licensing Criteria for Banks

    7.SAMA will only process a license for suitable applicants with the capacity and commitment to conduct banking business with integrity, prudence and competence on a continuing basis.
     
    8.These licensing criteria are applicable to all applicants, including foreign bank applicants intending to establish a foreign bank branch. These requirements represent minimum criteria that an applicant will need to meet. These licensing criteria should not be taken as exhaustive as SAMA may consider processing an application on other prudential grounds.
     
    9.SAMA expects all applicants to be aware and able to comply with the BCL, its prudential requirements, and other relevant laws and regulations from the commencement of their banking operations. It should be noted that more prudential requirements may be set on a case-by-case basis, for example, for newly licensed banks in their formative years.
     

    • A. Capital

      10.SAMA will also assess the adequacy of capital for an applicant on a case-by-case basis depending on the scale, nature and complexity of the operations as proposed in the business plan. Foreign Bank branches are not required to maintain capital in Kingdom of Saudi Arabia although capital requirements may be set on a case-by-case basis, for example, those intending to conduct high risk businesses and/or wanting to specialize in particular business lines that require specific level of capacity or competence.
       
      11.Applicants must satisfy SAMA that they are able to comply with SAMA’s capital adequacy requirements from the commencement of their banking operations. All locally incorporated banks are required to maintain, at all times, a minimum capital ratio (CAR) as set by SAMA. Newly established banks may be subject to a higher minimum capital ratio in their formative years, depending on the risk profile of their proposed operations.
       

    • B. Bank Ownership

      12.As per to the BCL, the founders and members of the Board of Directors of an applicant are required to demonstrate to SAMA that they are ’fit and proper’, are persons of good reputation, are well established and are of financially sound standing and substance. In the case of foreign bank branch applicants, this requirement applies both to the foreign bank itself and to the significant shareholders of the foreign bank. SAMA requires all significant shareholders to be able to demonstrate that their involvement in the bank represents a long-term commitment and that they have the capacity to contribute additional capital, if required.
       

    • D. Risk Management and Controls

      15.Applicants must satisfy SAMA that their proposed (or existing) risk management and control policies are adequate and appropriate for monitoring and limiting risk exposures in relation to domestic and, where relevant, international operations from the commencement of the bank’s operations. This includes, but is not limited to, the development, implementation and maintenance of adequate and appropriate policies and procedures for monitoring and managing Credit, Market, Liquidity, Compliance, AML/CTF risks and Operational Risks.
       
      16.Applicants must demonstrate that their proposed arrangements for reporting to SAMA are adequate and are in line with SAMA prudential standards and Article 15 of the Banking Control Law. Foreign bank branch applicants must demonstrate that the arrangements for reporting to SAMA and the parent foreign bank or head office are adequate and in compliance with applicable laws and regulations.
       
      17.In assessing whether the proposed policies and procedures for managing and controlling risks are adequate and appropriate for the applicant’s operations, SAMA will take into account the size, nature and complexity of the operations.
       

    • E. Compliance & Anti Money Laundering and Combating Terrorism Financing (AML/CTF)

      18.Applicants must satisfy SAMA that their proposed compliance and AML & CTF processes, people and systems are adequate and appropriate for ensuring compliance with:
       
       (a)Rules Governing Anti-Money Laundering & Combating Terrorist Financing and;
       
       (b)SAMA’s Compliance Manuel for Banks Working in SAUDI ARABIA and;
       
       (c)Other Kingdom of Saudi Arabia regulatory and legal requirements.
       
      19.In assessing whether the proposed compliance and AML/CTF processes, people and systems are adequate and appropriate for the applicant’s operations, SAMA will have regard to the size, nature and complexity of those operations.
       

    • F. Information Technology (IT), Accounting Systems and Outsourcing

      20.All Banks are required to submit prudential returns to SAMA. Required reporting forms and the frequency for Banks depend on the type of bank.
       
      21.Applicants must satisfy SAMA that their proposed information technology and accounting systems will be adequate for maintaining up-to-date records of all transactions and commitments undertaken by an applicant, so as to keep management and SAMA continuously and accurately informed of the bank’s condition and the risks to which it is exposed.
       
      22.Applicants are required to demonstrate to SAMA that their proposed IT and accounting systems will be capable of producing all required statutory and prudential information in an accurate and timely manner from the commencement of their banking operations.
       
      23.In assessing the overall adequacy of the proposed information and accounting systems, SAMA will have regard to the integrity and security of the systems and arrangements for Business Continuity Management (BCM) and Disaster Recovery Planning (DRP) as per SAMA’s SAMA Cyber Security Framework and BCM framework.
       
      24.Any planned outsourcing of material processes, people and systems must satisfy SAMA’s outsourcing requirements set out in SAMA’s Instructions for Outsourcing.
       

    • G. External and Internal Audit Arrangements

      25.Applicants must demonstrate to SAMA that arrangements have been established with external auditors in accordance with the requirements of the BCL and other relevant laws and regulations.
       
      26.Applicants are required to satisfy SAMA on the adequacy of proposed internal audit arrangements and requirements as set out in SAMA’s Principles of Corporate Governance for Banks Operating in Saudi Arabia.
       

    • H. Supervision by Home Supervisor (Foreign Bank Branch Application)

      27.Foreign bank branch applicants must have received a written consent from their home supervisor for the establishment of a banking operation in Kingdom of Saudi Arabia. Only applicants that are licensed banks in their home country and are listed in their domestic stock exchange will have their applications processed for granting of a license to operate as a foreign bank branch.
       
      28.Foreign bank branch applicants must satisfy SAMA that they are subject to adequate prudential supervision in their home country. In considering the standard of supervision exercised by the home supervisor, SAMA will have regard to the Core Principles of Banking Supervision (Core Principles) promulgated by the Basel Committee on Banking Supervision (BCBS). This includes whether the home supervisor supervises the foreign bank applicant on a consolidated basis in accordance with the principles contained in the Basel rules, and is prepared to co-operate with SAMA in the supervision of the bank branch in Kingdom of Saudi Arabia.