Magazine article Global Finance

Dynamic Future for Financial Services

Magazine article Global Finance

Dynamic Future for Financial Services

Article excerpt

Recent reforms are likely to stimulate a period of dynamism in the financial sector in Saudi Arabia. The investment banking and insurance industries have been opened up and forthcoming legislation is set to boost the nascent mortgage market. I believe this broadening and deepening of financial services provides exciting new opportunities for local and foreign companies and will prove beneficial to economic development.

New regulations will cause a major change in investment banking. Under the 2003 Capital Market Law all commercial banks have to move their investment banking operations into separate institutions and receive individual licenses for brokerage, asset management, custodial services, advisory services and securities arranging by the end of June. Licenses for these activities have also been granted to a number of new local players and some of the 10 foreign banks that have entered the Saudi market since 2002.

The introduction of these new financial institutions comes at a time of heightened demand for services such as corporate advisory and project finance as many companies are seeking to raise equity and debt in order to fund expansion plans. In addition, recent stock market volatility may encourage more private investors to use professional asset managers. At present, mutual funds account for less than five percent of market capitalization.

Deregulation is expected to spur rapid growth in the insurance sector. The central bank granted licenses to 13 insurance companies in October 2006 and a further 18 applications are being evaluated according to local press reports. …

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