'There is scope under the existing regulations for a licence to be issued,' says an HSBC Bank Middle East official. 'SAMA is being pragmatic and is trying to facilitate the licensing of the joint venture.'

The size of the new bank's capital base and the shape of its shareholder structure are yet to be finalised but it is expected that HSBC will take a majority stake.

'It is going to be a full-service investment bank that will take some of its infrastructure and staff from HSBC, some from Sabb and there will be also be some new capacity built,' the official says. 'Sabb will pass over its investment banking operations, though the new entity will maintain an umbilical cord to Sabb for access to its balance sheet.'

It is expected that the investment bank will primarily focus on corporate and project finance advisory activities - initial public offerings (IPOs), mergers and acquisitions, restructurings and greenfield projects - and debt-related transactions. No final decision has yet been taken on the transfer of other business lines, particularly on the equities side, from Sabb.

'The bank will be headquartered in Riyadh. In the future we'll examine the possibility of opening branches in the Eastern Province and Jeddah,' the official says.

The next steps in the evolution of the finance sector will come with the appointment of the Capital Markets Authority, and the publication of the rules governing its operations by 25 January (MEED 14:11:03).