Mergers and Acquisition for Further Consolidation.
The restructuring of the
banking system continued with the Saudi Cairo Bank into United Saudi
1997 merger of United Saudi Commercial Bank and Bank. In 1999, United Saudi Bank merged with Saudi
American Bank to form the third largest bank in banks is primarily driven by shareholders who believe that size matters.
the Kingdom. This wish to maximize
consolidation of Saudi share values and who
Further Technological Investment in the Shares Market. In August 1990, SAMA introduced a major enhancement of shares market by unveiling an electronic share trading and settlement system (Electronic Shares Information System). This system encouraged banks to open their vast branch network to investors who wished to trade in shares. The system permitted same day trading and settlement (t+0) features and also a paperless system where share certificates became obsolete. Over the next decade, number of shares traded and values traded grew in geometric progression. Many new companies were floated and existing companies tapped the share market. In 2001, the Electronic Share Trading System has been further enhanced and is now capable of handling government and corporate bonds, mutual funds and new investment products. This is a key infrastructure development that will strongly support the recently announced Capital Market Law.
Recent Legislative Changes with Significant Implications for the Saudi Banking and Financial System
In support of the Government policy of further economic liberalization, the pace of change for broadening and opening the financial sector has picked up significantly in the past five years. The Saudi Government is bringing in a string of legislative and procedural changes to permit rapid growth and innovation: the objective being increasing investment, job creation and competition. Some of the major initiatives include the following:
The Foreign Investment Law. In April 2000, Saudi Government promulgated a new Foreign Investment Act introducing major changes to the existing legal and regulatory framework and ushering in a new era of foreign investment in Saudi Arabia. The Act also had direct implications for the financial sector as it further opened up the Saudi market to foreign investments, including 100% foreign-owned companies. The Law created the Saudi Arabian General Investment Authority (SAGIA) empowered to issue licenses to companies for most of the investment activities. The main objective of SAGIA is to
oversee the investment affairs in the functions include preparing government
Kingdom, including foreign policies, proposing executive
investments. Its plans and criteria,
monitoring and evaluating performance of local studies in investment opportunities and coordinating
foreign investments, pertinent government
Since its creation in 2000, SAGIA has been instrumental in developing new laws and reforms to encourage investment. Hundreds of new investment projects have been approved with billions of dollars new investment. It is worth noting that in 2000, Saudi Arabia also introduced changes to the tax system whereby the income tax to be paid by foreign companies and investors in the highest tax bracket was reduced from 45% to 30%.