Saudis Shore up Banks as Slow Financial Crunch Worsens

The Kingdom is attempting to bolster its banking system

by Ambrose Evans-Pritchard

Saudi Arabia has injected $5.3bn of liquidity into the banking system to stave off a financial crunch as the oil slump drags on and capital continues to leak out the country.

Three-month interbank offered rates in Riyadh – the stress gauge watched by traders – have reached the highest since the Lehman crisis, ratcheting up 145 basis points over the last year.

The M3 money supply has contracted by 8pc in twelve months. The loan-to-deposit ratio has already blown through the government’s safety ceiling of 90pc, touching an all-time high.

“Deposits are falling and liquidity has been tightening for month after month,” said Patrick Dennis from Oxford Economics.

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