from Zero Hedge
Amid what some might call self-inflicted economic collapse, Saudi Arablia has announced a $5.3 billion bailout of its banking system as interbank borrowing rates near the highest since Lehman. In what the supposedly central bank calls “supportive monetary policy…on behalf of government entities,” is easing liquidity constraints with 28-day repo agreements and is the second liquidty injection this year.
While Saudi default risk has fallen – as the entire world has been liquified in recent months – it remains worse than Mexico, Russia, and South Africa.
As Bloomberg reports, The Saudi Arabian Monetary Agency, as the central bank is known, is giving banks about 20 billion riyals ($5.3 billion) of time deposits “on behalf of government entities.” It’s also introducing seven-day and 28-day repurchase agreements, as part of its “supportive monetary policy.” It didn’t provide further details.
The announcement, which comes as the kingdom prepares for its first international bond sale, is the latest step by the central bank to ease a cash crunch in the banking system. The Saudi Interbank Offered Rate, a key benchmark for pricing loans, has surged to the highest in seven years after the plunge in oil prices forced the government to withdraw money from the country’s banking system, squeezing liquidity.
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