24 September 2016
Riyadh - Saudi Arabian Monetary Agency (SAMA) may introduce measures to raise the loan-to-deposit ratio at local banks to 95 percent, says a report.

The ratio exceeded 90 percent by the end of July for the third consecutive month, according to data released by SAMA.

The value of loans to the private sector by the end of the month amounted to SR1.435 trillion, while the value of deposits amounted to SR1.578 trillion.

SAMA decided in mid-February to raise the upper limit of loan-to-deposit ratio to 90 percent from 85 percent. 

Saudi financial system is characterized by a high level of control imposed by SAMA that avoided the banking sector many of the financial crises that gripped much of the world's commercial banks during the past few years.

As a strategic goal, Ahmed Al-Khulaifi, governor of SAMA, continued to apply the monetary policies aimed at promoting financial stability.

"In the framework of the rapid development in the economic activities, SAMA has conducted a comprehensive study for payment systems in the kingdom resulted in designing a strategy for payments systems for the coming years in order to achieve the visions and aspirations to promote monetary and financial stability, as well as to meet current and future requirements of the domestic market," said the governor.

According to the governor, the strategy includes four areas: Developing Saudi Payments Network system and providing prepaid cards, setting a development plan for SADAD system, developing the financial transfers system to low-value payments and developing the roaming payments' system.

In a report released this month, Jadwa Investment said that growth in bank credit to the private sector slowed slightly in June, in line with the slower seasonal activity during Ramadan. Total bank deposits rose in June following two consecutive monthly declines. 

"The loan-to-deposit ratio rose to 90 percent, which leads us to believe that SAMA will further ease the limit," Jadwa economists stated. 

They said that the contribution to credit from longer term maturities have weakened relative to previous years, while short and medium term maturities continued with a healthy contribution toward overall credit growth.

© Arab News 2016