Abstract
The banking system in Saudi Arabia faces legal issues with Shari'ah compliance. Despite the fact that Islamic law is the main drive of the country's legal system, Islamic banking is not well supported in the banking regulations and it may encounter legal obstacles in applying some Islamic financial mechanisms. On the other hand, conventional banking is not free of legal hurdles as it is challenged by the Islamic judiciary system in the country where interest-based loans are not enforced. These cases create a dilemma where the banking system in the country has to take a clearer legal position toward interest and Islamic banking.