Riyadh - Mubasher: Saudi Arabian banks continue to report liquidity coverage ratios (LCRs) above 100% despite a 30% outflow of government-related deposits from the sector since oil prices declined sharply in November 2014, Fitch Ratings said in a recent report.
The banks' ability to withstand such a shock demonstrates that their liquidity positions, at least in the short term, are resilient, the report indicated.
LCRs measure a bank's stock of qualifying liquid assets over its short-term potential liquidity needs over a 30-day horizon.
Fitch believes that the pace of withdrawals, which is already slowing, will ease further as government debt issuance rises, however, the research firm believes the Saudi government will continue to withdraw deposits from the banking sector to shore up its finances.
“Saudi banks rely heavily on deposits for funding, with customer deposits representing 93% of total non-equity funding in the sector at end-2015,” it added.
The Saudi Arabian Monetary Agency (SAMA) recently injected SAR 20 billion ($5.3 billion) of government-related deposits to stabilize the banking sector and provide liquidity.
