This paper examines the macroeconomic determinants, such as economic growth, financial liberalization, trade openness, economic globalization and monetary policies, of the development of the banking sector in Egypt and Saudi Arabia. The study depends on the cointegration analysis to find out the long-run equilibrium relationship among the variables of the model. The results point out that economic growth has a long-run negative impact, whereas financial liberalization and real interest rate record a significant positive effect on credit to the private sector in both Egypt and Saudi Arabia. Economic globalization, however, seems to have just a significant positive effect in Saudi Arabia. Add to that, trade openness has a positive and significant effect on the credit to the private sector in Egypt whereas the growth rate of money supply exerts a positive and significant effect on the development of the banking sector in Saudi Arabia. This study reveals some implications for policy makers regarding the importance of liberalization policies and the need for further reforms in domestic banks to adapt with the requirements of globalization and global competition.