Saudi Arabia’s banking sector remains liquid despite low oil prices and there is no need to take special steps to increase the provision of funds, central bank governor Fahad al-Mubarak said on Wednesday.
The three-month Saudi interbank offered rate rose as high as 1.79 percent this week, its highest level since January 2009, from 0.78 percent in mid-2015. Low oil prices are reducing flows of fresh petrodollars into the economy and prompting the government to borrow to cover a big budget gap.
But Mubarak, speaking to reporters on the sidelines of a financial conference, said the pressure was not significant.
“The banking system in Saudi Arabia is quite liquid and does not need any further liquidity. It continues to support the private sector in terms of credit and to individuals,” he said.
“The lending-to-deposits ratio is very convenient and we didn’t find a need to boost liquidity in the banking system.”
He added, “The interest rate is subject to supply and demand and is determined by the banks….The cost of financing at SAMA (Saudi Arabian Monetary Agency) is very low and is available to banks.”
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