Middle East secured financing: From strategic potential to selective execution
May 2026
The past 12–18 months have not turned the Gulf into a fully-fledged interdealer repo hub. Ruth Ferris, head of secured financing, APAC, at MUFG, explores how the last year has reshaped parts of the region into live, investable secured financing markets — at a moment when global funding conditions have become more demanding, not less
Image: Cara-Foto/stock.adobe
Over the past year, the Middle East has remained a net attractor of global liquidity, even as geopolitical pressure and a shifting global rates regime altered the mechanics of funding markets. Rather than experiencing systemic stress, activity has been repriced, rerouted, and restructured, with secured financing evolving accordingly.
Three themes have dominated. First, cross-border funding and balance-sheet optimisation, particularly via syndicated loans and structured financing. Second, a widening divergence in local liquidity conditions, most clearly visible between Saudi Arabia and the UAE. Third, the institutionalisation of regional capital markets, including sustainable finance and sukuk, which is quietly expanding the region’s collateral base.
Crucially, global plumbing has mattered. Stable dollar funding conditions — anchored by a functioning US repo market — have allowed regional markets to evolve incrementally rather than defensively. The result is a region that has moved from “strategic potential” to selective execution, where participation decisions are now practical rather than hypothetical.
A global backdrop that shapes
regional reality
To understand what has changed in Middle East secured financing, it is necessary to start outside the region. The past year was not marked by a crisis in funding markets, but by volatility, repositioning, and repricing. Higher-for-longer expectations gave way to later easing, encouraging borrowers and lenders to actively reassess funding mix, tenor, and structure.
Deep and liquid Treasury markets provided a critical anchor. Strong trading activity and stable repo conditions helped ensure that US dollar liquidity continued to circulate efficiently through global balance sheets. For the Gulf, where most currencies are pegged and USD funding is transmitted directly into local money markets, this stability mattered enormously.
It meant that regional developments took place against a backdrop where funding was still “working”. Margin calls were manageable. Collateral did not become scarce in the wrong places. And international banks retained the capacity to engage selectively rather than retreat wholesale.
From pilots to observable flow
For much of the last decade, Gulf secured financing was characterised by promise rather than presence. Repo and securities lending existed, but activity was often bilateral, opaque, and relationship-driven, with limited scale and little transparency.
That began to change over the past 18 months.
By late 2025, repo and securities lending flows — particularly in Saudi Arabia and the UAE — had become observable, showing up consistently in market commentary and post-trade reporting. Activity remains fragmented and far from standardised, but it has crossed an important threshold: it is now repeatable.
This shift matters less because volumes are large, and more because the decision framework has changed. Institutions are no longer asking whether markets exist, but whether risk-return is attractive enough once legal, operational, and balance sheet constraints are priced in.
That alone represents meaningful progress.
Repo growth: Collateral first, market structure second
Repo market development across the Gulf has not been driven by interdealer sophistication. It has been driven by collateral availability.
Sovereign and quasi-sovereign issuance across Saudi Arabia, the UAE, and Qatar have expanded rapidly, creating new pools of repo-eligible assets. Banks suddenly had balance sheet incentives to fund inventory, manage liquidity, and optimise capital more actively than before.
In practical terms, this has translated into growing repo usage — but with clear limitations. Activity remains predominantly domestic, tenors are short, and standardisation varies by jurisdiction. Documentation frameworks differ, and Sharia requirements add an additional layer of complexity in some markets.
True interdealer repo — of the depth and netting efficiency seen in Europe — remains promising. That is not a criticism; it reflects where the market is in its evolutionary arc. Repo in the Gulf today is serving pragmatic liquidity and funding purposes, not acting as a homogenised regional money market.
Cross-border funding and
balance-sheet optimisation
While repo remains locally anchored, syndicated loans have become the clearest channel through which global liquidity flows into the region.
Over the past year, Gulf Cooperation Council (GCC) borrowers — particularly in Saudi Arabia — have demonstrated a consistent ability to attract offshore bank balance sheets, with Asian institutions playing an increasingly prominent role. Deals referenced to secured overnight financing rate (SOFR) and distributed across a broad lender base illustrate how Middle Eastern borrowers are optimising funding across currencies, tenors, and geographies.
For secured financing practitioners, this matters because syndicated funding often substitutes for or complements repo and securities lending. In volatile rate environments, borrowers rarely rely on a single instrument. Instead, they shift between secured and unsecured funding, onshore and offshore structures, and cash versus derivative-based solutions to manage cost and flexibility.
In that context, securities financing in the Middle East is no longer isolated. It sits inside a broader funding ecosystem that is becoming more sophisticated — even if individual components remain uneven in depth.
Policy rates: Anchored, but not identical
Currency pegs ensure that Gulf policy rates remain tightly aligned to the US cycle. Over the past year, both Saudi Arabia and the UAE followed Federal Reserve moves closely. On the surface, this suggests homogeneity.
Under the surface, it does not.
The real story has been the distribution of liquidity rather than the headline rate. The UAE entered the current environment with strong liquidity optics and highly visible central bank tools designed to keep overnight rates aligned with policy settings. Liquidity facilities have been deployed in a way that reassures markets during periods of uncertainty.
Saudi Arabia, by contrast, has at times priced with a more persistent local liquidity premium. Strong domestic credit demand, deposit dynamics and funding needs have caused spreads to behave differently from peers, even under the same external monetary umbrella.
For securities finance desks, this divergence matters. It influences how spreads are priced, how haircuts are calibrated, and how willing balance sheets are to extend beyond overnight.
Saudi Arabia: Securities lending becomes economically relevant
If one market stands out unmistakably over the past year, it is Saudi Arabia.
On the repo side, improved predictability has supported domestic liquidity management. But the most significant shift has been in securities lending.
Saudi Arabia has moved from being a marginal contributor to becoming the dominant source of regional securities lending activity. Borrow demand is no longer theoretical. Long-short funds, international asset managers, and index-driven strategies have all contributed to genuine scarcity in certain names, pushing lending fees to economically meaningful levels.
This is a critical turning point. For years, emerging market securities lending in the Gulf was discussed as a future optionality. Saudi Arabia now demonstrates that, under the right conditions, the economics can be real enough to justify operational and legal investment.
Importantly, this growth has been driven by structural factors — market liberalisation, index inclusion, and investor diversification — rather than transient volatility. That gives the market more durability than many early experiments elsewhere.
The UAE and ADGM: Building the rails
In contrast, the UAE’s secured financing story has been less about immediate flow and more about infrastructure.
Abu Dhabi Global Market (ADGM) has continued to strengthen its positioning as an international financial centre with familiar legal architecture, recognised courts, and a growing licensing ecosystem. For market participants, this matters because enforceability and governance increasingly influence where balance sheets are deployed.
While repo and securities lending volumes remain modest onshore, the UAE’s role as a gateway — for origination, structuring, and regional coverage — has become clearer. Most significant transactions continue to be booked offshore, but the regulatory plumbing in Abu Dhabi reduces friction for firms looking to engage with the region more systematically over time.
In securities finance, infrastructure precedes scale. The UAE appears to be following that path deliberately.
Sustainable finance: Collateral
with momentum
Another important structural shift has been the growth of sustainable finance issuance, particularly sukuk.
Green and sustainability-linked instruments have become a more visible component of regional capital markets, funding projects ranging from renewable energy to water efficiency. For secured financing markets, this trend matters less for its label and more for its balance sheet impact.
Deeper and more diverse bond markets expand the pool of high-quality collateral. Over time, they also improve benchmark formation and hedging activity, creating additional use cases for repo, margin lending, and securities borrowing.
Sustainable sukuk sits at the intersection of Islamic finance and global ESG demand. As issuance scales and investor participation broadens, its relevance to secured funding will increase correspondingly.
Where MUFG fits into the regional evolution
Against this backdrop, MUFG’s recent activity provides a clear example of how our global bank is positioning in the Middle East.
The first signal was leadership. The appointment of Yoshi Katsuda as regional head for the Middle East in September 2024 consolidated regional accountability and underscored renewed strategic focus, with Dubai as the operational hub.
The second was institutional anchoring in Saudi Arabia. In November 2024, MUFG entered a formal memorandum of understanding with the Public Investment Fund, focusing on infrastructure, project finance, and two-way investment flows between Saudi Arabia and Japan. That agreement placed MUFG firmly alongside Japan’s other megabanks as a core financial counterparty to Vision 2030-linked activity.
The third — and most economically relevant — pillar has been structured and project finance. This is where MUFG has consistently deployed balance sheet and expertise across the Middle East, aligning with its global leadership in long-dated, capital-intensive financing.
For securities finance practitioners, the takeaway is not that banks are racing into repo market making. It is that global institutions are embedding themselves in sovereign-adjacent and infrastructure financing, effectively positioning around the same collateral, issuers, and balance sheet dynamics that underpin secured markets.
Structured innovation beyond the Gulf
One of the clearest signals of the current environment is the growing use of structured, collateralised solutions when conventional markets are expensive or constrained.
Transactions such as sovereign-linked total return swaps — structured around domestic collateral but priced against global funding benchmarks — underline how regional banks are increasingly intermediate financing in hybrid formats. While not always Middle East-centric, these deals reflect a broader willingness to adapt structures to manage liquidity, cost, and market access.
For securities finance professionals, this reinforces a familiar lesson: innovation in secured financing often accelerates during volatile periods, when market participants are forced to optimise across instruments rather than rely on a single channel.
What to watch next
The Middle East secured financing story is no longer about whether a market exists. It is about whether it can scale without losing efficiency or predictability.
Three factors will matter most over the next year.
First, global dollar liquidity. A stable US funding environment continues to support incremental market development rather than defensive retrenchment.
Second, domestic liquidity management. Jurisdictions that deploy credible, transparent central bank tools are likely to attract more consistent secured financing activity.
Third, collateral evolution. As bond markets deepen — particularly through sustainable finance and sukuk — the raw material for repo and securities lending becomes more abundant and more attractive to international participants.
The bottom line
Over the past 18 months, the Middle East has moved decisively from strategic optionality to selective execution in secured financing.
Saudi Arabia has emerged as a genuine securities lending market with real fee economics. Repo activity has grown alongside sovereign issuance, albeit in a domestic and collateral-led form. The UAE continues to build the legal and regulatory infrastructure that will underpin future scale.
The region is not yet a seamless, harmonised secured financing hub. But it has reached a point where global desks ignore it at their own risk.
Three themes have dominated. First, cross-border funding and balance-sheet optimisation, particularly via syndicated loans and structured financing. Second, a widening divergence in local liquidity conditions, most clearly visible between Saudi Arabia and the UAE. Third, the institutionalisation of regional capital markets, including sustainable finance and sukuk, which is quietly expanding the region’s collateral base.
Crucially, global plumbing has mattered. Stable dollar funding conditions — anchored by a functioning US repo market — have allowed regional markets to evolve incrementally rather than defensively. The result is a region that has moved from “strategic potential” to selective execution, where participation decisions are now practical rather than hypothetical.
A global backdrop that shapes
regional reality
To understand what has changed in Middle East secured financing, it is necessary to start outside the region. The past year was not marked by a crisis in funding markets, but by volatility, repositioning, and repricing. Higher-for-longer expectations gave way to later easing, encouraging borrowers and lenders to actively reassess funding mix, tenor, and structure.
Deep and liquid Treasury markets provided a critical anchor. Strong trading activity and stable repo conditions helped ensure that US dollar liquidity continued to circulate efficiently through global balance sheets. For the Gulf, where most currencies are pegged and USD funding is transmitted directly into local money markets, this stability mattered enormously.
It meant that regional developments took place against a backdrop where funding was still “working”. Margin calls were manageable. Collateral did not become scarce in the wrong places. And international banks retained the capacity to engage selectively rather than retreat wholesale.
From pilots to observable flow
For much of the last decade, Gulf secured financing was characterised by promise rather than presence. Repo and securities lending existed, but activity was often bilateral, opaque, and relationship-driven, with limited scale and little transparency.
That began to change over the past 18 months.
By late 2025, repo and securities lending flows — particularly in Saudi Arabia and the UAE — had become observable, showing up consistently in market commentary and post-trade reporting. Activity remains fragmented and far from standardised, but it has crossed an important threshold: it is now repeatable.
This shift matters less because volumes are large, and more because the decision framework has changed. Institutions are no longer asking whether markets exist, but whether risk-return is attractive enough once legal, operational, and balance sheet constraints are priced in.
That alone represents meaningful progress.
Repo growth: Collateral first, market structure second
Repo market development across the Gulf has not been driven by interdealer sophistication. It has been driven by collateral availability.
Sovereign and quasi-sovereign issuance across Saudi Arabia, the UAE, and Qatar have expanded rapidly, creating new pools of repo-eligible assets. Banks suddenly had balance sheet incentives to fund inventory, manage liquidity, and optimise capital more actively than before.
In practical terms, this has translated into growing repo usage — but with clear limitations. Activity remains predominantly domestic, tenors are short, and standardisation varies by jurisdiction. Documentation frameworks differ, and Sharia requirements add an additional layer of complexity in some markets.
True interdealer repo — of the depth and netting efficiency seen in Europe — remains promising. That is not a criticism; it reflects where the market is in its evolutionary arc. Repo in the Gulf today is serving pragmatic liquidity and funding purposes, not acting as a homogenised regional money market.
Cross-border funding and
balance-sheet optimisation
While repo remains locally anchored, syndicated loans have become the clearest channel through which global liquidity flows into the region.
Over the past year, Gulf Cooperation Council (GCC) borrowers — particularly in Saudi Arabia — have demonstrated a consistent ability to attract offshore bank balance sheets, with Asian institutions playing an increasingly prominent role. Deals referenced to secured overnight financing rate (SOFR) and distributed across a broad lender base illustrate how Middle Eastern borrowers are optimising funding across currencies, tenors, and geographies.
For secured financing practitioners, this matters because syndicated funding often substitutes for or complements repo and securities lending. In volatile rate environments, borrowers rarely rely on a single instrument. Instead, they shift between secured and unsecured funding, onshore and offshore structures, and cash versus derivative-based solutions to manage cost and flexibility.
In that context, securities financing in the Middle East is no longer isolated. It sits inside a broader funding ecosystem that is becoming more sophisticated — even if individual components remain uneven in depth.
Policy rates: Anchored, but not identical
Currency pegs ensure that Gulf policy rates remain tightly aligned to the US cycle. Over the past year, both Saudi Arabia and the UAE followed Federal Reserve moves closely. On the surface, this suggests homogeneity.
Under the surface, it does not.
The real story has been the distribution of liquidity rather than the headline rate. The UAE entered the current environment with strong liquidity optics and highly visible central bank tools designed to keep overnight rates aligned with policy settings. Liquidity facilities have been deployed in a way that reassures markets during periods of uncertainty.
Saudi Arabia, by contrast, has at times priced with a more persistent local liquidity premium. Strong domestic credit demand, deposit dynamics and funding needs have caused spreads to behave differently from peers, even under the same external monetary umbrella.
For securities finance desks, this divergence matters. It influences how spreads are priced, how haircuts are calibrated, and how willing balance sheets are to extend beyond overnight.
Saudi Arabia: Securities lending becomes economically relevant
If one market stands out unmistakably over the past year, it is Saudi Arabia.
On the repo side, improved predictability has supported domestic liquidity management. But the most significant shift has been in securities lending.
Saudi Arabia has moved from being a marginal contributor to becoming the dominant source of regional securities lending activity. Borrow demand is no longer theoretical. Long-short funds, international asset managers, and index-driven strategies have all contributed to genuine scarcity in certain names, pushing lending fees to economically meaningful levels.
This is a critical turning point. For years, emerging market securities lending in the Gulf was discussed as a future optionality. Saudi Arabia now demonstrates that, under the right conditions, the economics can be real enough to justify operational and legal investment.
Importantly, this growth has been driven by structural factors — market liberalisation, index inclusion, and investor diversification — rather than transient volatility. That gives the market more durability than many early experiments elsewhere.
The UAE and ADGM: Building the rails
In contrast, the UAE’s secured financing story has been less about immediate flow and more about infrastructure.
Abu Dhabi Global Market (ADGM) has continued to strengthen its positioning as an international financial centre with familiar legal architecture, recognised courts, and a growing licensing ecosystem. For market participants, this matters because enforceability and governance increasingly influence where balance sheets are deployed.
While repo and securities lending volumes remain modest onshore, the UAE’s role as a gateway — for origination, structuring, and regional coverage — has become clearer. Most significant transactions continue to be booked offshore, but the regulatory plumbing in Abu Dhabi reduces friction for firms looking to engage with the region more systematically over time.
In securities finance, infrastructure precedes scale. The UAE appears to be following that path deliberately.
Sustainable finance: Collateral
with momentum
Another important structural shift has been the growth of sustainable finance issuance, particularly sukuk.
Green and sustainability-linked instruments have become a more visible component of regional capital markets, funding projects ranging from renewable energy to water efficiency. For secured financing markets, this trend matters less for its label and more for its balance sheet impact.
Deeper and more diverse bond markets expand the pool of high-quality collateral. Over time, they also improve benchmark formation and hedging activity, creating additional use cases for repo, margin lending, and securities borrowing.
Sustainable sukuk sits at the intersection of Islamic finance and global ESG demand. As issuance scales and investor participation broadens, its relevance to secured funding will increase correspondingly.
Where MUFG fits into the regional evolution
Against this backdrop, MUFG’s recent activity provides a clear example of how our global bank is positioning in the Middle East.
The first signal was leadership. The appointment of Yoshi Katsuda as regional head for the Middle East in September 2024 consolidated regional accountability and underscored renewed strategic focus, with Dubai as the operational hub.
The second was institutional anchoring in Saudi Arabia. In November 2024, MUFG entered a formal memorandum of understanding with the Public Investment Fund, focusing on infrastructure, project finance, and two-way investment flows between Saudi Arabia and Japan. That agreement placed MUFG firmly alongside Japan’s other megabanks as a core financial counterparty to Vision 2030-linked activity.
The third — and most economically relevant — pillar has been structured and project finance. This is where MUFG has consistently deployed balance sheet and expertise across the Middle East, aligning with its global leadership in long-dated, capital-intensive financing.
For securities finance practitioners, the takeaway is not that banks are racing into repo market making. It is that global institutions are embedding themselves in sovereign-adjacent and infrastructure financing, effectively positioning around the same collateral, issuers, and balance sheet dynamics that underpin secured markets.
Structured innovation beyond the Gulf
One of the clearest signals of the current environment is the growing use of structured, collateralised solutions when conventional markets are expensive or constrained.
Transactions such as sovereign-linked total return swaps — structured around domestic collateral but priced against global funding benchmarks — underline how regional banks are increasingly intermediate financing in hybrid formats. While not always Middle East-centric, these deals reflect a broader willingness to adapt structures to manage liquidity, cost, and market access.
For securities finance professionals, this reinforces a familiar lesson: innovation in secured financing often accelerates during volatile periods, when market participants are forced to optimise across instruments rather than rely on a single channel.
What to watch next
The Middle East secured financing story is no longer about whether a market exists. It is about whether it can scale without losing efficiency or predictability.
Three factors will matter most over the next year.
First, global dollar liquidity. A stable US funding environment continues to support incremental market development rather than defensive retrenchment.
Second, domestic liquidity management. Jurisdictions that deploy credible, transparent central bank tools are likely to attract more consistent secured financing activity.
Third, collateral evolution. As bond markets deepen — particularly through sustainable finance and sukuk — the raw material for repo and securities lending becomes more abundant and more attractive to international participants.
The bottom line
Over the past 18 months, the Middle East has moved decisively from strategic optionality to selective execution in secured financing.
Saudi Arabia has emerged as a genuine securities lending market with real fee economics. Repo activity has grown alongside sovereign issuance, albeit in a domestic and collateral-led form. The UAE continues to build the legal and regulatory infrastructure that will underpin future scale.
The region is not yet a seamless, harmonised secured financing hub. But it has reached a point where global desks ignore it at their own risk.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
.jpg)