Saudi banks have benefited greatly from the Universal Banking Model permitted by SAMA and offer a range of financial services including investment management, mutual funds, brokerage, and other services. During the past decade, the volume of business of Saudi banks has grown at a phenomenal rate. In the ten years period 1996-2005, the banks’ assets grew by 213 per cent, deposits by 224 per cent and capital and reserves by 248 per cent. During this period the profits for the banking system showed strong growth and the return on equity averaged well over 20% and return on assets was over 2%. The strength of Saudi banks is further underlined by their average risk-based capital adequacy, which has been high according to Basel capital adequacy standard, and averaged 18% during the past decade. If we review our long history of foreign investment in the financial sector since early 1950, a number of foreign banks were granted licenses to open branches in the Kingdom. In 1976, there were 12 banks in the Kingdom including 10 foreign banks. To Saudize the banking system and benefit from foreign expertise of the banks operating in the Kingdom, the government invited foreign banks to convert their branches into Saudi-foreign joint stock companies with an equity share of 40% for the foreign partner. Technical Management Agreements were also entered into to manage the new banks by the foreign partners.
Consequently, Saudi banking companies were established and became integrated with the global banking system, benefiting from its expertise and training capabilities, and coped with its  BIS Review 59/2006  1  developments. Eventually, the Saudi banks compare well with their counterparts in advanced countries. During the 1990s, no new bank licenses were issued. However the year 2000 ushered in a new era of openness when a license was granted to the Gulf International Bank, a Bahraini bank, owned by the GCC countries. This was to implement a decision made by the GCC Heads of States to permit qualifying GCC-owned banks in their home markets. This has been followed by new licenses to 4 more GCC-owned banks, (namely the Emirates Bank International, the National Bank of Kuwait, the National Bank of Bahrain and the Bank Muscat). Licenses were also granted to five other major international and emerging market banks (that include BNP Paribas, Deutsche Bank, JP Morgan, State Bank of India and National Bank of Pakistan). Just during this past week Deutsche Bank has opened its branch in Riyadh and National Bank of Kuwait in Jeddah. The remaining banks are in the process of opening their branches in 2006. On 27/2/1427H, a Royal Decree was issued approving the incorporation of a joint-stock company under the name "the Development Bank", with a capital of Rls 15.0 billion. This would enhance competition and open new horizons for diversified banking services.