Saudi Arabian banknotes
Several Saudi banks, including Al Rajhi Bank, Banque Saudi Fransi (BSF), Bank AlJazira, and the Arab National Bank (ANB), have announced new sukuk issuances recently. 
Saudi banks have been issuing sukuk for years, with an increased pace lately. These sukuk include conventional issuances as well as Tier 1 and Tier 2 additional capital sukuk.
Sukuk are Sharia-compliant financial certificates, allowing investors to own part of the issuer’s assets until maturity. Holders receive a share of the profit from the underlying assets, with the profit rate being a percentage of the nominal value, paid annually or semi-annually.
Sukuk provide a regular fixed income.
Experts told Argaam that the rise in sukuk issuances in Saudi Arabia is due to two main factors: increased financing needs as deposit growth slowed compared to loans, driven by Vision 2030, and favorable market conditions, including monetary easing, which made sukuk an attractive tool for banks and investors.
Sukuk Issuances Double in 2024
Saudi sukuk issuances surged in 2024, reaching $10 billion, double the $5 billion in 2023, according to Mohamed Damak, Global Head of Islamic Finance Middle East and Africa at SP Global Ratings.
Mohamed Damak, Global Head of Islamic Finance – Middle East Africa at SP Global Ratings
This increase is attributed to two main reasons: the strong growth of Saudi banks driven by Vision 2030, leading to higher refinancing needs, and improving market conditions with monetary easing.
Hassan Fawaz, Chairman of GivTrade Group, also attributed the rise in sukuk issuances to lower yields following a 50 basis point cut in US and Saudi interest rates, making sukuk more attractive.
Hassan Fawaz, Chairman of GivTrade Group
He added that Saudi Arabia’s Vision 2030 projects require significant financing, especially with the loan-to-deposit ratio exceeding 100%.
Fawaz mentioned that banks and companies are increasingly using authorized platforms by the Capital Market Authority to issue debt instruments, expanding operations and maximizing assets in a supportive investment environment.
Types of Sukuk and Their Regulatory Impact
Damak explained that Tier 1 and Tier 2 sukuk are designed to absorb losses or conserve liquidity under certain conditions. Tier 1 sukuk support “going concern,” allowing banks to suspend periodic distributions before non-viability.
Tier 2 sukuk are used after a bank reaches non-viability. Regular sukuk do not include loss-absorption provisions.
Fawaz further clarified that Tier 1 sukuk are perpetual, forming part of a bank’s core capital, with deferred distributions. Tier 2 sukuk have a set maturity of 5 to 10 years and serve as supplementary capital with higher risks.
Regular sukuk represent ownership in specific assets or projects and are Sharia-compliant, backed by tangible assets, making them ideal for financing projects and investment activities.
Capital Requirements Under Basel III
Damak highlighted that Basel III regulations require banks to maintain a minimum common equity ratio of 7% and a total capital ratio of 10.5%, along with additional requirements from SAMA, such as the countercyclical buffer and requirements for domestic systemically important banks (D-SIBs).
Fawaz explained that banks must maintain at least 8% capital against risk-weighted assets, with Tier 1 capital making up 6%, including CET1 at 4.5% and AT1 at 1.5%. Tier 2 capital should account for 2%. An additional 2.5% capital protection reserve raises the total capital minimum to 10.5%.
He clarified that all Saudi banks must meet these requirements, but larger banks like National Commercial Bank and Al Rajhi Bank face more stringent stress tests to enhance their ability to absorb shocks.
Loan-to-Deposit Ratios: Growth Indicators
By November 2024, the loan-to-deposit ratio in Saudi Arabia exceeded 104%, with the adjusted ratio at 82%, still below the 90% recommended by SAMA.
Damak expects the ratio to stay high due to Vision 2030-driven financing needs, with banks increasing deposits and exploring alternative funding, such as external financing and potentially a mortgage-backed securities market.
Fawaz noted that these ratios indicate a shift in Saudi banks’ financing structure, supported by strong growth in banking finance for Vision 2030 projects. He added that banks are relying more on sukuk and international debt while maintaining strong capital adequacy ratios of 19.2%. Regulatory oversight by SAMA boosts banks’ risk management and stability.
SAMA began implementing Basel III reforms for local banks on January 1, 2023, to improve capital requirement sensitivity based on transactions and activities. Saudi banks’ capital adequacy ratios are among the highest globally, surpassing Basel III and SAMA’s 8% minimum.
Sukuk Issuances Expectations for 2025
Global sukuk issuances reached $193.4 billion in 2024, with SP Global projecting $190 billion to $200 billion in 2025, including $70 billion to $80 billion in foreign currency sukuk. This growth is driven by continued monetary easing and supportive economic conditions in key Islamic finance countries.
Saudi Arabia’s sukuk issuances reached $26.1 billion in 2024, with similar performance expected in 2025. Fawaz predicts a sharp increase in 2025, particularly after a 239.88% rise in December 2024 compared to November.Bas du formulaire
Saudi Arabian banknotes
Several Saudi banks, including Al Rajhi Bank, Banque Saudi Fransi (BSF), Bank AlJazira, and the Arab National Bank (ANB), have announced new sukuk issuances recently.
Saudi banks have been issuing sukuk for years, with an increased pace lately. These sukuk include conventional issuances as well as Tier 1 and Tier 2 additional capital sukuk.
Sukuk are Sharia-compliant financial certificates, allowing investors to own part of the issuer’s assets until maturity. Holders receive a share of the profit from the underlying assets, with the profit rate being a percentage of the nominal value, paid annually or semi-annually.
Sukuk provide a regular fixed income.
Experts told Argaam that the rise in sukuk issuances in Saudi Arabia is due to two main factors: increased financing needs as deposit growth slowed compared to loans, driven by Vision 2030, and favorable market conditions, including monetary easing, which made sukuk an attractive tool for banks and investors.
Sukuk Issuances Double in 2024
Saudi sukuk issuances surged in 2024, reaching $10 billion, double the $5 billion in 2023, according to Mohamed Damak, Global Head of Islamic Finance Middle East and Africa at SP Global Ratings.
Mohamed Damak, Global Head of Islamic Finance – Middle East Africa at SP Global Ratings
This increase is attributed to two main reasons: the strong growth of Saudi banks driven by Vision 2030, leading to higher refinancing needs, and improving market conditions with monetary easing.
Hassan Fawaz, Chairman of GivTrade Group, also attributed the rise in sukuk issuances to lower yields following a 50 basis point cut in US and Saudi interest rates, making sukuk more attractive.
Hassan Fawaz, Chairman of GivTrade Group
He added that Saudi Arabia’s Vision 2030 projects require significant financing, especially with the loan-to-deposit ratio exceeding 100%.
Fawaz mentioned that banks and companies are increasingly using authorized platforms by the Capital Market Authority to issue debt instruments, expanding operations and maximizing assets in a supportive investment environment.
Types of Sukuk and Their Regulatory Impact
Damak explained that Tier 1 and Tier 2 sukuk are designed to absorb losses or conserve liquidity under certain conditions. Tier 1 sukuk support “going concern,” allowing banks to suspend periodic distributions before non-viability.
Tier 2 sukuk are used after a bank reaches non-viability. Regular sukuk do not include loss-absorption provisions.
Fawaz further clarified that Tier 1 sukuk are perpetual, forming part of a bank’s core capital, with deferred distributions. Tier 2 sukuk have a set maturity of 5 to 10 years and serve as supplementary capital with higher risks.
Regular sukuk represent ownership in specific assets or projects and are Sharia-compliant, backed by tangible assets, making them ideal for financing projects and investment activities.
Capital Requirements Under Basel III
Damak highlighted that Basel III regulations require banks to maintain a minimum common equity ratio of 7% and a total capital ratio of 10.5%, along with additional requirements from SAMA, such as the countercyclical buffer and requirements for domestic systemically important banks (D-SIBs).
Fawaz explained that banks must maintain at least 8% capital against risk-weighted assets, with Tier 1 capital making up 6%, including CET1 at 4.5% and AT1 at 1.5%. Tier 2 capital should account for 2%. An additional 2.5% capital protection reserve raises the total capital minimum to 10.5%.
He clarified that all Saudi banks must meet these requirements, but larger banks like National Commercial Bank and Al Rajhi Bank face more stringent stress tests to enhance their ability to absorb shocks.
Loan-to-Deposit Ratios: Growth Indicators
By November 2024, the loan-to-deposit ratio in Saudi Arabia exceeded 104%, with the adjusted ratio at 82%, still below the 90% recommended by SAMA.
Damak expects the ratio to stay high due to Vision 2030-driven financing needs, with banks increasing deposits and exploring alternative funding, such as external financing and potentially a mortgage-backed securities market.
Fawaz noted that these ratios indicate a shift in Saudi banks’ financing structure, supported by strong growth in banking finance for Vision 2030 projects. He added that banks are relying more on sukuk and international debt while maintaining strong capital adequacy ratios of 19.2%. Regulatory oversight by SAMA boosts banks’ risk management and stability.
SAMA began implementing Basel III reforms for local banks on January 1, 2023, to improve capital requirement sensitivity based on transactions and activities. Saudi banks’ capital adequacy ratios are among the highest globally, surpassing Basel III and SAMA’s 8% minimum.
Sukuk Issuances Expectations for 2025
Global sukuk issuances reached $193.4 billion in 2024, with SP Global projecting $190 billion to $200 billion in 2025, including $70 billion to $80 billion in foreign currency sukuk. This growth is driven by continued monetary easing and supportive economic conditions in key Islamic finance countries.
Saudi Arabia’s sukuk issuances reached $26.1 billion in 2024, with similar performance expected in 2025. Fawaz predicts a sharp increase in 2025, particularly after a 239.88% rise in December 2024 compared to November.Bas du formulaire
