Sama slashes banking, payment fees: The Saudi Central Bank (Sama) is capping administrative fees on consumer loans and slashing charges for digital transfers, a move that threatens a reliable revenue stream for the Kingdom’s lenders just as they were leaning into non-funded income growth.

The gist: The new circular halves the maximum admin fee banks can charge on non-real estate finance — capping it at 0.5% of the loan or SAR 2.5k. International transaction fees are now limited to 2% of the amount, while fees for international cash withdrawals (excluding the GCC Net) are now capped at 3% a maximum limit of SAR 25. Reissuance rates for Mada cards were also slashed.

Why it matters: The “easy money” buffer is shrinking

The tightening comes at a precarious moment, as the banking sector’s bottomline growth in the third quarter was heavily reliant on the very fees Sama just capped. With net interest margins compressing last quarter due to high funding costs, banks pivoted to fee generation to maintain growth.

By the numbers: Non-interest income surged 7.5% q-o-q in 3Q, acting as the primary driver of the moderate 2.6% growth in net income, while core net interest income was virtually unchanged, according to Alvarez & Marsal’s 3Q Banking Pulse report.

Capping admin fees forces banks to look elsewhere for growth. Banks will need to process more loans to make the same fee income. They’ll also need to cut down on waste and optimize the efficiency of operations, as the cost-to-income ratio just became more essential for profitability.

The customer mix will make a difference: Banks with the largest retail customer bases — think Al Rajhi and Saudi National Bank — will be more affected compared to banks focused on corporate clients.

The digital nudge

The new rules nudge holdout customers — and banks — to cut down reliance on physical branches, charging just SAR 0.50 for transactions less than SAR 2.5k, and SAR 1 for transfers between SAR 2.5k and SAR 20k, while leaving a bigger room for charges on physical services.

What’s next? All financial institutions under Sama’s purview have 60 days to apply the new fees.

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