Lombard loans in Saudi Arabia.
Private, securities-backed credit against Saudi Arabia-listed shares — pledged, not sold, with ownership retained.
A Lombard loan against Saudi Arabia-listed shares is credit secured by a pledge of equity listed on the Tadawul. The holder pledges the shares as collateral, draws cash against a fraction of their market value, keeps beneficial ownership and dividends subject to structuring, and recovers the position in full on repayment. It is a loan against shares rather than a sale of them — the Geneva private-banking form of what is elsewhere called a share-backed loan.
- Lombard loans are arranged against shares listed on the Tadawul (Tadawul).
- The pledge is not a sale: ownership, dividends, and the upside stay with the holder.
- Loan-to-value is calibrated to the specific position, funded in SAR or cross-currency.
- Structured under the CMA regime, with disclosure from 5%.
Eligible collateral and venues
Lombard Financing arranges facilities against equity listed on the principal Saudi Arabia venue: Saudi Exchange (Tadawul) (Tadawul). Eligibility at the position level turns on the liquidity and free float of the specific line, its volatility, and the size of the holding relative to its typical traded volume — the same variables that drive the loan-to-value.
Regulator and disclosure
Shares listed in Saudi Arabia are regulated by Capital Market Authority (CMA). Substantial-shareholding disclosure is triggered from 5%, and a pledge over a large line is structured with that reporting regime in view so that the transaction remains discreet and compliant. Where a holding sits near a control or takeover threshold, the structure is arranged to avoid disturbing the position.
Funding, custody, and structuring
Facilities are typically arranged for a tenor of twelve to thirty-six months, funded in SAR or in another currency on a cross-currency basis. Throughout the facility the pledged shares are held by a qualified custodian under bankruptcy-remote arrangements, so the security is clean and the holder’s ownership is preserved. Non-recourse, limited-recourse, and full-recourse structures are available, and the choice interacts with the loan-to-value and the pricing. One distinction is worth drawing at the outset: this is not a stock loan in the securities-lending sense, where title passes to a borrower who may on-lend or short the line. Here the shares are pledged and remain the holder’s throughout, as the comparison of Lombard, margin, and stock-loan structures sets out.
| Listing venue(s) | Saudi Exchange (Tadawul) (Tadawul) |
|---|---|
| Regulator | Capital Market Authority (CMA) |
| Currency | SAR (cross-currency available) |
| Disclosure threshold | From 5% substantial-holding disclosure |
| Principal indices | TASI (Tadawul All Share Index), MT30 |
| Indicative tenor | 12–36 months, renewable by agreement |
| Recourse | Non-recourse / limited-recourse / full-recourse |
Detail by listing venue
Each venue has a page of its own, setting out how securities-backed credit is arranged against shares admitted there — the disclosure regime, the settlement and custody chain, the eligible segments, and the currency in which a loan against shares is normally drawn.
- Lombard loans against Tadawul-listed shares — Saudi Exchange (Tadawul), Riyadh. CMA-regulated, with disclosure from 5%; indices TASI (Tadawul All Share Index), MT30.
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On this market, specifically.
The market and its listed universe
The Saudi Exchange, still universally called Tadawul, is the Kingdom’s only equity venue, with the Main Market above and the Nomu parallel market, opened in 2017, below it for smaller issuers. The benchmarks are the TASI, which spans the whole Main Market, and the narrower MT30. Weighting is unusually top-heavy: Saudi Aramco, whose 2019 flotation remains the largest IPO on record, sits alongside SABIC, Al Rajhi Bank, Saudi National Bank and stc. Free float is the figure that matters most for anyone borrowing against shares here, because the Public Investment Fund, other state bodies and founding families retain very large strategic blocks, so the tradeable portion of a big name can be a small fraction of its capitalisation.
Who borrows against listed shares here
Two kinds of holder dominate the Saudi register. The state is one: the Public Investment Fund, government institutions and pension bodies hold strategic blocks across banks, petrochemicals, telecoms and the Aramco line. The other is the merchant family — the trading, contracting and distribution houses of Jeddah, Riyadh and the Eastern Province, several of which have floated subsidiaries since the Vision 2030 privatisation programme began. Their liquidity problem has a distinctly Saudi cause. Estates devolve under Sharia rules of inheritance, which allocate fixed shares among heirs, so a founder’s block fragments across branches within a generation or two and one branch buying out another becomes a recurring need. Selling into a thin free float is conspicuous; pledged securities are not.
Disclosure and regulation
The Capital Market Authority requires a substantial holder to notify at 5% and on each subsequent 1% change, so a large Tadawul position carries a fairly granular reporting trail as it is built. Two features then shape a pledge. First, Sharia compliance sits at the centre of structuring, and the security arrangement is framed to respect it. Second, foreign ownership — opened progressively since 2015 — can carry issuer-level considerations for a non-resident client. A Lombard credit is arranged so the CMA notifications are observed and the client’s disclosed holding, along with any Sharia and foreign-ownership constraints, is preserved.
The legal form of the security
Security over Saudi shares is a rahn, a pledge recognised in Sharia, now sitting alongside two modern instruments: the Commercial Pledge Law of 2018, which created a unified register for pledges over movables, and the Civil Transactions Law promulgated in 2023, the Kingdom’s first codified law of contract and property. Which of these governs a pledge over depository-held listed shares, and how it interacts with the Capital Market Authority’s own registration route, is the first question for Saudi counsel. The second concerns enforcement. Saudi courts apply Sharia, conventional interest is not straightforwardly recoverable, and realisation runs through the Enforcement Courts or, for securities disputes, the Committee for the Resolution of Securities Disputes. Ask counsel how a sale on default would actually proceed.
Custody and how security is taken
Saudi listed securities are dematerialised and held at the Securities Depository Center Company, Edaa, a subsidiary of Saudi Tadawul Group, with Muqassa acting as central counterparty for clearing. The market runs an investor-level account structure, so a holding is identified to its beneficial owner at the depository rather than buried in an omnibus, and foreign institutions may use the independent custody model introduced as the market opened to qualified foreign investors. Security is therefore taken inside the depository: Edaa’s rules provide for a pledge to be registered against the securities so that they cannot be transferred while it stands. Confirm the current pledge-registration procedure, forms and release mechanics with the custodian and with Edaa before documenting.
Currency and cross-border considerations
The riyal has been pegged to the dollar at 3.75 since 1986 and is held there by the Saudi Central Bank, so a facility drawn in dollars against Saudi collateral carries peg risk rather than day-to-day currency risk. There is no exchange control: no approval is needed for a non-resident to borrow against a Saudi line, and loan proceeds, dividends and sale proceeds move out of the Kingdom freely. Two practical points remain. A non-resident’s access to the shares in the first place runs through the qualified foreign investor framework or a swap arrangement, which shapes where the collateral can sit; and onshore margin lending by Capital Market Authority licensed firms is a separately regulated activity, distinct from a bilateral secured facility.
Tax questions to put to your adviser
Saudi Arabia levies no personal income tax and no stamp duty on share transfers, so the questions for a Saudi tax adviser sit elsewhere. Zakat, assessed by the Zakat, Tax and Customs Authority on Saudi and Gulf-owned interests, is the first: how a pledge, or an intervening holding vehicle, affects the zakat base. Second, gains on shares traded on the exchange benefit from relief in defined circumstances, and whether the client’s holding and any enforcement sale would fall inside it should be confirmed rather than assumed. Third, withholding on loan charges remitted to a non-resident lender, and whether a treaty reduces it. Fourth, whether a Sharia-compliant structure changes the characterisation of the return for tax purposes.
General information only — not tax advice. Treatment turns on your own circumstances and residence, and on law that changes.
An illustrative example
Consider a family whose holding company owns a block in a Tadawul-listed group floated during the recent privatisation wave. An inheritance has divided the block among several heirs and one branch wishes to buy out another, without a market sale that would be visible in a modest free float. Part of the block is pledged, registered against the position at Edaa so the shares are blocked from transfer while the security stands, and the financing is arranged on Sharia-compliant lines where the mandate requires it. Dividends and votes stay with the family. The illustration is about mechanics and sequence, not about any amount, ratio or price.
Illustrative only — not an offer, a quotation, or a commitment to lend.