Banks in Saudi Arabia have been told that they have to plan for replacing all expatriates in their workforce with locals, in another sign that the government’s focus on jobs for locals will force many foreigners out of the country.
The Saudi Arabian Monetary Authority (Sama), which regulates the banking sector, issued a circular to the domestic banks last month. “The circular said banks needed to submit a plan for the Saudisation of all positions in the bank, including senior management roles,” says the managing director of one local bank.
Bankers in the kingdom say the plan has to be submitted by mid-June. Although no deadline has been stipulated for replacing all expatriates bankers, the move has caused some concern. “I don’t think they could get the banking sector to be 100 per cent Saudi,” says the managing director. “It’s not possible and trying to force it too quickly would put in jeopardy the whole system.”
Another senior banker in the kingdom says: “They are trying to drive home a point, but there is no deadline attached to this so it is unclear if the endgame is really to make the banks 100 per cent Saudi, or just to put more pressure on the banks to aim for that.”
The regulation has also come as a surprise to many, as the banking sector has one of the highest penetrations of locals in the economy. However, job creation has become one of the key objectives in Riyadh, particularly in the wake of anti-government protest movements around the region that have been sparked by high levels of youth unemployment, as well as feelings of political disenfranchisement. Of the kingdom’s population of 28 million, about 8.5 million are expatriates.
The unemployment rate among Saudis was 12 per cent at the end of 2012, but is thought to be much higher among the young. In 2011, Riyadh launched a new scheme called Nitaqat, which provides a mixture of incentives and penalties to private sector firms to encourage them to hire more locals. The latest move by Sama goes far beyond the Nitaqat system.
The new regulation only affects banks that fall under the oversight of Sama. Investment banking operations of international banks like the US’ JP Morgan and the UK’s Barclays are regulated by the Capital Market Authority (CMA). So far the CMA is understood to have not issued a similar regulation.
Sama did not respond to requests for comment.