Article 8 of the Saudi Banking Control Law
المادة 8 من نظام مراقبة البنوك
The article bars a bank from giving one person loans, facilities or guarantees exceeding 25% of its reserves and capital; the Agency may raise this to 50%, and it does not apply to dealings between banks and their branches.
Official text (Arabic)
This article has not been amended since the law was issued.
يحظر على أي بنك أن يعطي قرضا أو أن يمنح تسهيلات ائتمانية أو أن يقدم كفالة أو ضمانا مالي آخر لصالح أي شخص طبيعي أو اعتباري بمبالغ يتجاوز مجموعها (25%) خمسة وعشرين في المائة من مجموع احتياطيات البنك ورأس ماله المدفوع أو المستثمر. ويجوز للمؤسسة لمقتضيات المصلحة العامة وبالشروط التي تحددها أن تزيد هذه النسبة إلى (50%) خمسين في المائة.
ولا تسري أحكام الفقرة السابقة على المعاملات التي تتم بين البنوك أو بين المراكز الرئيسية للبنوك وفروعها، أو بين هذه الفروع.
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 8 explained in plain English
This article aims to prevent risk from being concentrated in one customer; if a large customer defaulted after taking a huge part of a bank's financing, the bank and its depositors would be exposed to danger.
The rule: a bank is prohibited from providing, for the benefit of any natural or legal person:
- a loan,
- or credit facilities,
- or a guarantee or any other financial security,
in amounts whose total exceeds 25% of the total of the bank's reserves and its paid-up or invested capital. What counts is the total the bank provides to one person in all these forms, not each form separately.
Power to raise it: the Agency may, for the requirements of the public interest and under conditions it sets, increase this percentage to 50%.
The exception: the limit does not apply to dealings between banks, or between banks' head offices and their branches, or between those branches.
It is followed by Article 9, which prohibits other forms of lending, such as unsecured lending to board members. Companies negotiating large financing may consult a lawyer specialized in banking and finance to understand the effect of this limit on their financing.
Practical example
A contracting company in Riyadh asked its bank for a large loan and a letter of guarantee. If the total of the bank's paid-up capital and reserves is SAR 1,000 million, the total of the loan, the letter of guarantee and any other facilities to the company may not exceed SAR 250 million, unless the Agency raises the percentage, under its conditions, to a maximum of 50%.
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 8 of the Saudi Banking Control Law
What is the maximum a bank may lend to one customer?
The total of loans, facilities and guarantees to one person may not exceed 25% of the bank's reserves and paid-up or invested capital.
Can the 25% limit be exceeded?
The Agency may, for the requirements of the public interest and under conditions it sets, raise it to 50%.
Does the limit apply to loans between banks?
No. It does not apply to dealings between banks, or between head offices and branches, or between branches.
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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.