In 2003, the Saudi economy produced an exceptional performance on the back of $85bn in oil revenues, the highest in 20 years. The year was also exceptional because a new capital markets law and insurance law were approved, which could not only radically reshape the entire financial sector in the kingdom but also have a significant impact on financial services in the region, particularly in Bahrain and Dubai.
Saudi Arabia, the largest economy in the Middle East by far with a GDP of $189bn in 2002, has for decades been a magnet that has attracted bankers and financial institutions from across the globe. Given its massive oil wealth, bankers flocked in droves to get a slice of the action from both the government and the burgeoning private sector. The conservative Saudi authorities tried to keep a lid on the financial explosion taking place and, unlike many countries, maintained a strict limit on the number of licensed banks and only allowed some foreign banks entry as affiliates of domestic banks. Limits were also placed on non-bank financial intermediaries thereby limiting official activities in the securities, investment and capital markets areas.