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Saudi Central Bank Pumps $3 Billion into Banks - ASHARQ AL-AWSAT English Archive
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RIYADH (Reuters) – The Saudi central bank poured between $2-$3 billion in deposits into the banking system to ease liquidity pressures, its first direct injection of U.S. dollars in a decade, bankers said on Tuesday.

The Saudi Arabian Monetary Agency (SAMA), the kingdom’s central bank, also provided riyal liquidity and the bankers said it may add more U.S. dollar funds to the system given current conditions. The bankers said SAMA had deposited between $200-$350 million with each bank.

The global financial crisis has created tight credit conditions for banks, forcing governments and central banks around the world to provide liquidity to defrost interbank lending.

The three-month Saudi Interbank Offered Rate stood at 4.65125 percent and is likely to fall after the latest attempt to ease credit conditions.

SAMA made a rare repurchase rate cut on Oct. 12 — to 5 percent from 5.5 percent — and also lowered reserve requirements to give increased liquidity to banks. It was the first repo rate move since February 2007 and the first cut in four years.

Saudi, which pegs its currency to the U.S. dollar, normally adjusts the reverse repo rate — the deposit rate at SAMA — as it tracks the U.S. Federal Reserve.

Meanwhile, the reserve change was expected to release about 10 billion riyals ($2.67 billion) to commercial banks from funds held in the central bank as cash reserves.

That move had sent a signal to markets that the kingdom, which has long insisted it had the means to support its economy and banking sector if necessary, was prepared to take required action.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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