In an important financial and political move, Saudi Arabia announced it would grant a full branch banking licence to Germany’s Deutsche Bank, Europe’s second largest bank by assets.

Coming during a visit to the kingdom by Germany’s Chancellor Gerhard

Schröder on October 6, the licence is the first to be granted to a

non-Arab bank in decades. More licences to international banks are

expected to follow.

Earlier this year, the long-awaited capital markets law was approved,

clearing the way for a new era of financial liberalisation. The Saudi

Arabian Securities and Exchange Commission was established, thereby

creating the infrastructure for focused investment banking and broking

institutions.

While the licence for Deutsche has no limitations on the type of

business that can be done, the bank said that initially it would focus

on wholesale activities. The bank, which is unlikely to begin

operations in Saudi Arabia before next year, will enter a relatively

closed market of 10 major banks, including five with international

banks as minority shareholders.

However, with pressure from the World Trade Organization plus the new

legislation, the financial sector is opening up slowly. A number of

Gulf banks, including Bahrain’s Gulf International Bank and National

Bank of Kuwait, have been granted licences recently but Deutsche is the

first global bank to be granted a full licence.

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