International Swaps and Derivatives Association publishes Saudi legal opinions confirming close-out netting enforceability under Saudi Central Bank regulations

The International Swaps and Derivatives Association (ISDA) published new legal opinions confirming the enforceability of close-out netting under netting regulations issued by the Saudi Central Bank (SAMA), aimed at providing legal certainty for derivatives trading with Saudi counterparties supervised by SAMA. ISDA noted that SAMA’s regulations, published in February 2025, mean all Group-of-20 jurisdictions now recognize the enforceability of close-out netting. The SAMA regulations are closely based on ISDA’s 2018 Model Netting Act and apply where at least one party is supervised by SAMA, including banks and SAMA-supervised non-bank financial institutions. Riyadh-based law firm STAT drafted two opinions commissioned by ISDA, one covering the ISDA Master Agreement and one covering Islamic derivatives under the ISDA/International Islamic Financial Market Tahawwut Master Agreement; ISDA also reiterated that enforceable netting reduces credit risk by collapsing obligations to a single net payment, citing Bank for International Settlements data showing USD 17.6 trillion in global gross derivatives market value versus USD 3.0 trillion in gross credit exposure at end-2024 after legally enforceable bilateral netting. ISDA plans to extend the netting opinions to cover draft netting regulations issued by the Saudi Capital Market Authority once those rules are finalized, which are intended to apply to other financial market participants including asset managers and infrastructure providers.