According to the agency, the rating actions follow a similar action on Saudi Arabia's sovereign rating earlier this month. All the six banks' long-term IDRs are linked to the Saudi sovereign's and driven by their Support Rating Floors (SRFs), Fitch said.
The rating agency’s assessment is based on the Saudi authorities' strong ability to support the banking system, given large, albeit reduced from their historical levels, external reserves.
It also reflects a long record of support for Saudi banks, irrespective of their size, franchise, funding structure and level of government ownership. “We see high contagion risk among domestic banks given that the market is fairly small and interconnected. We believe this is an added incentive for the state to support any Saudi bank, if needed, to maintain market confidence and stability,” said Fitch.
(Writing by Brinda Darasha; editing by Daniel Luiz)
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