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In this week’s edition of Argaam Weekend, we present a compelling opportunity for Saudi decision makers to consider: the recent shift toward a more relaxed regulatory stance on bank mergers in the United States under the Trump administration.  Through our analysis, we will explain why acquisition of a bank is the best way to get access to the US banking sector and how this move could generate significant benefits. This’s regulated by the Federal Reserve System (FRS), which’s the central bank of the United States, the most influential financial institution in the world. Shortly after the confirmation of the new vice-chair of supervision at the Federal Reserve in June, there were indications of a shift toward a more bank-friendly regulatory stance, including the acceleration of merger and acquisition approval processes. The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, the other primary federal bank regulators, have withdrawn previous guidelines that had complicated the completion of acquisition deals. Why acquisitions? Although banks may seek official license through the OCC, this procedure has traditionally been lengthy that could ran into years, as regulators conduct thorough reviews of multiple applicants’ systems and data. We hence believe that acquisitions offer a fast-track for Saudi institutional investors to get in the highly important banking sector in the US. One key requirement by US regulators with acquisition is the need for the acquiring party, especially a foreign entity, to demonstrate financial robustness and operational capability. US regulators prioritize the ability of foreign owners to maintain solvency and manage risks effectively. Reviewing our report of the second quarter in the kingdom this year and according to the most latest available official data, we highlight SAMA's robust external liquidity position while optimizing returns across global financial markets. With total foreign components maintaining approximately SAR 1.67 trillion in readily accessible international assets, the central bank retains ample resources for risk mitigation, contingency planning and external payment obligations. The marginal increase in cash in vault from SAR 27.6 billion (June 1, 2025) to SAR 28.18 billion (July 1, 2025) ensures operational continuity, while the strategic securities allocation enhancement positions SAMA to capitalize on favourable global market conditions. Such bank assets as shown in the chart above from Argaam Macro platform reassures regulators in the US about Saudi Arabia’s ability to support financial institutions under ownership, ensuring stability even under adverse economic conditions. Furthermore, the PIF’s assets are expected to surpass $1.075 trillion by the end of 2025. The PIF’s goal is to reach at least $2 trillion by 2030, with potential to exceed $3 trillion. PIF currently manages between $925 billion and $945 billion in assets. This underscores a substantial and rapidly growing sovereign wealth fund with significant capital resources. It also reflects not only strong financial capacity but also long-term strategic management and scalability of financial operations. Additionally, foreign exchange reserves remained substantial at SAR 1.716 trillion (around $458 billion) in June 2025. This reserve adequacy, well above IMF recommended levels, enables Saudi Arabia to sustain its development agenda during challenging commodity cycles while maintaining currency stability and external credibility through continued access to global capital markets. 
The Edge of Owning a US Bank vs. Starting from Scratch Having a licensed US bank under Saudi ownership provides direct access to a sophisticated and liquid financial market, enabling more efficient fundraising and investment management for large-scale infrastructure and diversification initiatives outlined in Saudi Arabia’s Vision 2030. This’s the world’s largest and most diverse capital markets. By having an official operation license in the US banking sector. We believe this will especially facilitate issuance of corporate bonds, since the Saudi financial entity directly have access to deep liquidity in the US and also at a rate lower than alternatives including in international markets and at home. (Around 5.4% in Saudi Arabia against 4.9% in the US). The lower interest rate matters because it reduces the cost of borrowing, allowing Saudi Arabia to raise funds more cheaply and save on interest payments over the life of the bonds. This means more money can be used, for example, to finance a maga project rather than servicing debt. But the key advantage we reserve for the conclusion of our analysis is owning a US bank itself instead of building up one from scratch. This preference stems from the value of an established operational framework, existing customer base, already obtained regulatory approvals (which are very complicated to obtain in the US), experienced workforce, and developed technology infrastructure. All of which reduce the time, risk, and costs involved in market entry. An already operational bank generates revenue streams from day one, whereas a new bank must invest heavily in customer acquisition and marketing, which can take several years before turning profitable. The jewel of the crown is the trained and experienced workforce, who are familiar with local regulations, risk management practices, loan underwriting, and client servicing. Building and training a workforce from scratch is costly and time-intensive, and employee turnover risk is higher during new ventures. |
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