Easier lending rules and direct cash injections are doing little to alleviate a cash shortage at Saudi Arabian banks, now at its worst since the financial crisis.
The government is seeking to plug a hole in its finances by withdrawing deposits and selling local currency bonds to lenders in monthly auctions. The country, grappling with lower oil prices, raised 98 billion riyals (US$26bn) from bond sales to domestic institutions last year, with that figure probably set to rise to about 120bn riyals in 2016, according to Saudi Fransi Capital.
That’s draining funds from the system, reflected in interbank rates in Saudi Arabia that are at their highest since 2009 and which climbed 15 straight days through Monday.
In addition, the loan-to-deposit ratio has exceeded central bank limits for the past two months, even after the country boosted the percentage of its deposits that a bank can lend earlier this year.
“The authorities are struggling to find an effective way to boost liquidity,” Asim Bukhtiar, the head of research at Saudi Fransi Capital, said by phone from Riyadh. “Any liquidity injection is just being pulled back out by the monthly government bond issues.”
The three-month Saudi Interbank Offered Rate, a key benchmark used for pricing loans, rose to 2.308 per cent on August 29, its highest since January 2009, according to data compiled by Bloomberg. The Saudi Arabian Monetary Agency increased the limit that banks can lend to the equivalent of 90 per cent of deposits, up from 85 per cent, people with knowledge of the matter said in February.
That figure rose to 90.5 per cent in July, according to monthly data released by SAMA, as the central bank is known, even after the regulator offered $4bn to banks in late June, people with knowledge of the matter said.
The kingdom may raise more than $10bn from its first international bond sale in October, people with knowledge of the matter said.
The central bank “is conscious that Saibor has gone up materially and it will increase the cost of funds for local companies and crimp economic growth,” said Anita Yadav, head of fixed income research at Emirates NBD. “They have to do something to manage this liquidity.”
The increase in the loan-to-deposit rate will probably prompt Saudi authorities to increase the limits further, Yadav said, though a planned international bond issue will bring in some money from outside the country and may relieve some of the pressure, she said.
“Any moves to further ease the loan-to-deposit rate may only improve things for another six months before the banks hit the limit again,” Saudi Fransi’s Bukhtiar said.
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Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Abu Dhabi GP schedule
Friday: First practice - 1pm; Second practice - 5pm
Saturday: Final practice - 2pm; Qualifying - 5pm
Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm
UAE currency: the story behind the money in your pockets
Overall head-to-head
Federer 6-1 Cilic
Head-to-head at Wimbledon
Federer 1-0 Cilic
Grand Slams titles
Federer 18-1 Cilic
Best Wimbledon performance
Federer: Winner (2003, 2004, 2005, 2006, 2007, 2009, 2012)
Cilic: Final (2017*)
TOURNAMENT INFO
2018 ICC World Twenty20 Asian Western Regional Qualifier
The top three teams progress to the Asia Qualifier
Thursday results
UAE beat Kuwait by 86 runs
Qatar beat Bahrain by five wickets
Saudi Arabia beat Maldives by 35 runs
Friday fixtures
10am, third-place playoff – Saudi Arabia v Kuwait
3pm, final – UAE v Qatar
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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MATCH INFO
Schalke 0
Werder Bremen 1 (Bittencourt 32')
Man of the match Leonardo Bittencourt (Werder Bremen)
UAE currency: the story behind the money in your pockets
COMPANY%20PROFILE
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Killing of Qassem Suleimani
Killing of Qassem Suleimani
Scoreline:
Cardiff City 0
Liverpool 2
Wijnaldum 57', Milner 81' (pen)
Day 1, Dubai Test: At a glance
Moment of the day Sadeera Samarawickrama set pulses racing with his strokeplay on his introduction to Test cricket. It reached a feverish peak when he stepped down the wicket and launched Yasir Shah, who many regard as the world’s leading spinner, back over his head for six. No matter that he was out soon after: it felt as though the future had arrived.
Stat of the day - 5 The last time Sri Lanka played a Test in Dubai – they won here in 2013 – they had four players in their XI who were known as wicketkeepers. This time they have gone one better. Each of Dinesh Chandimal, Kaushal Silva, Samarawickrama, Kusal Mendis, and Niroshan Dickwella – the nominated gloveman here – can keep wicket.
The verdict Sri Lanka want to make history by becoming the first team to beat Pakistan in a full Test series in the UAE. They could not have made a better start, first by winning the toss, then by scoring freely on an easy-paced pitch. The fact Yasir Shah found some turn on Day 1, too, will have interested their own spin bowlers.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Results
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UAE currency: the story behind the money in your pockets