Saudi Banks Drive Record Surge in Dollar Debt Issuance to Fund Vision 2030 Projects

Saudi Arabia’s banking sector is leading a dramatic shift in Gulf financing, with lenders turning heavily to US dollar-denominated subordinated debt to support rapid credit expansion and fund large-scale national projects, according to a new analysis by Fitch Ratings.

The agency said Saudi banks are at the forefront of a regional surge in international bond issuance that is expected to persist into 2026, as institutions respond to rising capital requirements and ambitious government spending linked to the kingdom’s Vision 2030 transformation plan.

So far in 2025, Gulf Cooperation Council (GCC) banks have issued more than $55 billion in US dollar debt, already surpassing last year’s total of $36 billion. Saudi banks account for over half of this volume, raising $29.3 billion, including $11.7 billion in additional Tier 1 (AT1) and Tier 2 capital. Subordinated debt now represents more than 70 percent of Saudi banks’ dollar issuance, compared with around 50 percent in 2024, highlighting a shift toward riskier but capital-strengthening instruments.

Fitch pointed to several drivers behind the trend. Saudi lenders are expected to post the fastest credit growth in the GCC, projected at 12 percent in 2025. The lending boom, which is fueling multi-trillion-dollar Vision 2030 projects, is outpacing deposit growth and gradually eroding core capital buffers. Between 2020 and 2024, the sector’s common equity Tier 1 (CET1) ratio dropped by 213 basis points, the report noted.

New regulatory measures are also set to increase pressure. From May 2026, banks will face a 1 percent countercyclical buffer and stricter rules on interest-rate risk. Additionally, loans tied to major Vision 2030 projects carry higher risk weightings under Basel III standards, further straining capital positions.

While AT1 bonds remain the dominant non-core capital instrument, Saudi banks are broadening their funding base. Nearly $6 billion in Tier 2 debt has been issued in 2025, helping diversify capital structures and attract global investors.

Fitch expects the issuance momentum to remain strong into 2026, driven by more than $10 billion in maturing debt that will need refinancing, ongoing financing demand, and the prospect of lower interest rates. Around $1.8 billion of AT1 bonds are also due for their first call dates next year and are expected to be redeemed under favorable market conditions.

The ratings agency previously forecast that GCC banks would exceed $60 billion in US dollar debt issuance in 2025, with $40 billion excluding certificates of deposit — comfortably surpassing last year’s record levels. It said the surge reflects a combination of rising maturities, robust credit growth, and favorable financing conditions in global markets.

With Saudi Arabia’s Vision 2030 continuing to reshape the region’s economic landscape, the kingdom’s banks look set to remain the primary drivers of Gulf debt issuance in the years ahead.