Article 6 of the Saudi Banking Control Law
المادة 6 من نظام مراقبة البنوك
The article bars a bank's deposit liabilities from exceeding fifteen times its reserves and capital, and requires it on excess to increase capital or deposit 50% of the excess with the Agency within a month.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يجوز أن تزيد التزامات البنك من الودائع على خمسة عشر مثلا من مجموع احتياطاته ورأس ماله المدفوع أو المستثمر، فإذا زادت التزامات الودائع على هذا القدر وجب على البنك- في خلال شهر من تاريخ تقديم البيان المنصوص عليه في الفقرة الأولى من المادة الخامسة عشرة - أن يزيد رأس ماله واحتياطاته إلى الحد المقرر أو أن يودع لدى المؤسسة (50%) خمسين في المائة من المبلغ الزائد.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 6 explained in plain English
This article ties the volume of deposits a bank accepts to its own financial capacity, so that it does not expand its obligations toward depositors without sufficient capital to protect them.
The rule: a bank's deposit liabilities may not exceed 15 times the total of its reserves and paid-up capital (or invested capital in the case of a foreign bank's branches, as Article 1 defines it).
If the limit is exceeded, the bank must, within one month of submitting the monthly statement provided for in the first paragraph of Article 15, choose one of two things:
- increase its capital and reserves to the prescribed limit, or
- deposit 50% of the excess amount with the Agency.
Article 15 requires the bank to send a consolidated monthly statement of its financial position to the Agency at the end of the following month; the deposit ratio appears from this statement, and the one-month period starts from it.
A numerical example: a bank whose reserves and capital together are SAR 100 million has a maximum for its deposit liabilities of SAR 1,500 million. If they reach SAR 1,600 million, the excess is SAR 100 million, and it must either raise its capital and reserves or deposit SAR 50 million with the Agency.
This provision is directed at banks and their management; for practical details one can consult a lawyer specialized in banking and finance.
Practical example
A bank in Riyadh has paid-up capital and reserves totaling SAR 200 million, and its monthly statement showed its deposits reached SAR 3,200 million, which is more than 15 times (SAR 3,000 million) by SAR 200 million. It has one month from the date of submitting the statement either to increase its capital and reserves to the required limit or to deposit SAR 100 million with the Agency.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 6 of the Saudi Banking Control Law
What is the maximum for a bank's deposits in Saudi law?
Deposit liabilities may not exceed 15 times the total of the bank's reserves and its paid-up or invested capital.
What must a bank do if its deposits exceed the limit?
Within a month of submitting the monthly statement, it must increase its capital and reserves to the prescribed limit or deposit 50% of the excess amount with the Agency.
When does the one-month period start?
From the date of submitting the statement provided for in the first paragraph of Article 15, which is the monthly statement of financial position.
Articles this article refers to
More articles on Statutory Deposit and Liquidity
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.