Move to maintain financial sector stability
The Saudi Arabian Monetary Agency (Sama) has announced that it is injecting SR20bn ($5.3bn) into the Saudi banking system.
The move is aimed at maintaining stability in the banking system.
Sama also pointed out that non-performing loans in Saudi Arabia remain low at 1.3 per cent and the coverage ratio is at 165 per cent. The capital adequacy ratio is 18 per cent, indicating Saudi banks are still very healthy.
The temporary Sama deposits will replace government deposits.
Sama will also introduce seven and 28-day repurchase agreements (repos), alongside the existing one-day repos.
Liquidity has been tightening in Saudi Arabia as a result of lower oil revenues. Money supply tightened 1.2 per cent in July, month on month, while the three-month Saudi interbank offered rate (Saibor) rose from 0.78 per cent in July 2015 to 2.23 per cent in July 2016.
In June Sama reportedly offered SR15bn in short-term loans to cash-strapped banks.
A number of high profile Saudi companies, including Saudi Binladin Group and Saudi Oger are struggling to meet finance obligations.
MEED reported earlier in September that Sama was collating information on banks exposure to the two contractors.
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