An in-depth look into the Saudi Central Bank new law

Saudi Arabia’s Cabinet recently ratified the Saudi Central Bank new law, which renames Saudi Arabian Monetary Authority as the Saudi Central Bank while retaining the acronym SAMA.

The Saudi Central Bank will be directly linked to the King and will continue to enjoy financial and administrative independence.

SAMA, headquartered in Riyadh, may open new branches or monetary centers across the Kingdom. It can also open representative offices and appoint agents outside the Kingdom.

The new law identifies the objectives of the Saudi Central Bank as follows:

1) Maintaining monetary stability.

2) Promoting the stability of, and enhancing confidence in, the financial sector.

3) Supporting economic growth.

Under the new law, the Saudi Central Bank may not engage in trading or participate in trading activities, or have interest in any commercial, industrial or agricultural project, except for projects that are necessary for its objectives.

The central bank is not allowed to buy or own properties, excluding the assets required for realizing its objectives or diversifying its foreign investments.

The Saudi Central Bank may not finance or lend to the government, or any other natural or judicial person, excluding financial institutions for liquidity and crisis management.

Moreover, the assets, revenues and properties of the Saudi Central Bank may not be inspected, seized, confiscated or expropriated, or in any way be subject to bankruptcy procedures.

SAMA’s board of directors consists of the central bank governor as board chairman, the deputy governor as the deputy chairman, and five board members who are non-government officials.

Under the new law, the Saudi Central Bank is solely responsible for determining and implementing the monetary policy, and selecting its tools and measures.

The central bank shall also invest in foreign reserves, set up and develop the infrastructure of the national payment, settlements, and clearing systems.

It shall also set up, develop and operate FinTech platforms, and issue the related rules, regulations and licenses.