Saudi Arabia is making moves to attract international financial firms to set up shop in Riyadh, with the country’s wealth fund now asking about regional headquarters licenses from bankers looking to do business with the $925 billion investor. The government’s push for increased local presence is evident, and firms that do not show commitment to the country may face challenges in securing lucrative deals.
While some banks initially hoped to avoid these requirements, the pressure is mounting, particularly after Goldman Sachs Group Inc. became the first Wall Street giant to obtain a regional headquarters license. This development is prompting other players in the financial sector to consider their strategies in Saudi Arabia.
Waleed Rasromani, national managing partner for Saudi Arabia at law firm Linklaters, highlighted the impact of adopting RHQ licenses within a sector, noting that it can influence competitors to follow suit. Many financial firms are now carefully examining the RHQ rules in response to the changing landscape.
According to sources familiar with the matter, the Public Investment Fund is now including inquiries about regional headquarters licenses in its procurement process. Although firms are not currently mandated to obtain these licenses, the mere discussion of regulatory status is creating pressure for compliance.
Bankers engaging with the fund are feeling the effects of these developments, although it appears that meeting the license requirements has not yet impacted their ability to secure business opportunities. The likes of JPMorgan Chase & Co. and Citigroup Inc. are keen to maintain their ability to pursue deals in Saudi Arabia, a key market with significant investment prospects.
The introduction of the Saudi regional headquarters law in 2021 aimed to attract foreign direct investment, signaling the country’s commitment to fostering a conducive business environment for international players.
However, the lack of clarity surrounding the rules is posing challenges for banks. For instance, it remains unclear how Goldman Sachs’ operations in the Middle East will evolve following the acquisition of its RHQ license. Key Saudi entities, including the Central Bank and the Capital Market Authority, are likely to play pivotal roles in shaping the future landscape for financial firms operating in the kingdom.
