Goldman Sachs has reportedly become the first Wall Street bank to obtain a license to open a regional headquarters in Saudi Arabia, as the kingdom deepens its financial markets amid sweeping economic reforms.
The US-headquartered investment bank received a license from the Saudi Ministry of Investment to set up its regional headquarters in Riyadh, the capital, Bloomberg reported Thursday.
It is not clear how many staff members will be in the office and what proportion of the bank’s Middle East operations will be based in Riyadh.
Goldman Sachs declined to comment on the report.
Last year, Goldman opened a new office in Abu Dhabi Global Market (ADGM), the international financial center of UAE's capital, Abu Dhabi.
Relocation regulations
The bank’s reported new regional headquarters in Riyadh is a boon to the kingdom, which looks to lure foreign capital and deepen its capital markets to compete with the UAE.
In 2021, Saudi authorities introduced new regulations for state contracts in a bid to limit “economic leakage” — government spending that can benefit international firms that don’t have a substantial presence in the kingdom. The new rules that were implemented this year require companies to have a regional base in Saudi Arabia with at least 15 employees, including executives overseeing other countries. Otherwise, they risk losing market share to the kingdom’s state entities, such as the Public Investment Fund (PIF).
The deadline for multinationals to locate regional headquarters to the kingdom was Jan. 1, 2024. Back in 2021, the Saudi government said it would stop working with international companies without a regional headquarters in the Gulf country by 2024.
The regulations appear to be working — Saudi Investment Minister Khalid Al-Falih said earlier this month than over 400 international companies had obtained regional HQ licenses for the kingdom.
BlackRock on board
Goldman is not the only mover and shaker in the financial world that is betting on Riyadh being the region’s next financial center. At the end of April, the world’s biggest asset manager set up shop in the Saudi capital. Larry Fink’s BlackRock, which has $10.5 trillion assets under management, will play a pivotal role in helping finance Saudi Arabia’s Vision 2030 ambitions by opening an investment firm anchored by $5 billion in capital from the kingdom’s PIF. First announced in 2016 by Saudi Crown Prince Mohammed bin Salman, Vision 2030 is the kingdom's sweeping agenda to diversify its economy away from oil by heavily investing in other sectors such as clean energy, entertainment, sports and tourism.
However, Dubai is the region’s current financial hub, and unlike Riyadh, both the emirate and Abu Dhabi have free zones for financial services with independent regulators. Riyadh’s King Abdullah Financial District does not have its own regulator, and financial institutions operating in the kingdom are regulated by the Saudi Central Bank and the Capital Markets Authority. Many multinationals have said that the regulatory environment in Saudi Arabia lacked clarity. For example, the kingdom only revealed details on tax breaks last December, barely a month before the relocation deadline.
