Saudi banks under the guidance of SAMA, had expanded their branch network, introduced stronger management methods and new technologies, raised new capital, improved their profitability and set aside large provisions for doubtful accounts. The aim of this paper is to analyze the capital adequacy ratio and its impact on Saudi Arabian Banking Sector. We compared the Capital Adequacy Ratio of Islamic and Conventional banks listed in Tadawul Stock. After analyzing the financial statements of the banks for five years (2013-2017) the present study concluded that. Alinma Bank had the highest mean among the Islamic Banks while Samba Bank had the highest mean among the Conventional Banks. The present study also studied the BASEL III norms of banks in Saudi Arabia. The two-way ANOVA test was applied to evaluate the financial performance of Islamic and Conventional Banks. Our results also indicate that there was no significant difference between the Capital Adequacy Ratio of the Islamic and selected Saudi Conventional Banks.