Saudi urged to pump more funds into banks

Saudi Arabia needs to inject more funds into its banking system as part of overall plans to ensure sufficient liquidity and avert a lending problem in the next two years, the Gulf Kingdom's largest bank said yesterday.

The National Commercial Bank (NCB) said such plans should also involve payment of public debt to banks, higher public investment in the banking sector and creation of a credit rating system to expand bond issue by banks.

NCB, the largest bank in Saudi Arabia by assets, said it expected a resurgence of the funding problem by banks in 2010 and urged the Kingdom's Central Bank, the Saudi Arabian Monetary Authority (Sama), to act from now. "Our short-term recommendations include the injection of (medium-term) deposits by Sama to provide an immediate liquidity relief and a stable source of funding to the banking system throughout 2009-2010, in line with the SAR6.1 billion that had been injected back in the fourth quarter of 2008, given the estimated funding gap of around SAR73bn and SAR101bn in 2009 and 2010, respectively," NCB said in a study sent to Emirates Business.