Large Saudi bank cuts money quote; rates may fall back be­low repo

Kuwait Times - - BUSINESS -

DUBAI: Saudi Ara­bia’s biggest com­mer­cial bank cut its quote for three-month money in the in­ter­bank mar­ket yes­ter­day in a sig­nal that rates could fall fur­ther as a liq­uid­ity crunch in the bank­ing sys­tem eases.

Saudi in­ter­bank of­fered rates soared this year, pres­sur­ing com­pa­nies and banks seek­ing to raise funds, as low oil prices slashed flows of petrodol­lars into banks and forced the gov­ern­ment to is­sue bonds do­mes­ti­cally to fund a big bud­get deficit.

Three-month SAIBOR hit a seven-year high of 2.386 per­cent last month, from be­low 0.80 per­cent in Au­gust 2015. In a sign of un­usual stress on the sys­tem, it rose above the cen­tral bank’s re­pur­chase rate of 2.00 per­cent, which the cen­tral bank uses to sup­ply funds overnight to banks caught short of money. In the past four weeks, how­ever, rates have been fall­ing by around 1 or 2 ba­sis points each day, with three­month SAIBOR drop­ping back to 2.134 per­cent yes­ter­day from 2.148 per­cent at the end of last week.

In a sig­nal that rates could drop fur­ther, Na­tional Com­mer­cial Bank, the biggest bank, quoted three-month SAIBOR at 2.10 per­cent yes­ter­day, down from the 2.15 per­cent which it had quoted through­out this month. The gov­ern­ment is the biggest share­holder in the bank. An in­ter­na­tional banker fa­mil­iar with the Saudi money mar­ket said rates ap­peared to be re­turn­ing to more nor­mal lev­els, though liq­uid­ity would not be­come loose again as long as oil prices stayed low. He sug­gested three-month SAIBOR might drop in com­ing weeks be­low the repo rate.

“For many years, SAIBOR has rarely if ever been above the repo rate for a sig­nif­i­cant amount of time. This was an ex­tra­or­di­nary sit­u­a­tion,” he said. “Now to some ex­tent the sit­u­a­tion is nor­mal­iz­ing.” Sev­eral fac­tors are fu­elling the down­trend in rates. In Septem­ber and Oc­to­ber, the cen­tral bank launched seven-, 28- and 90day re­pur­chase agree­ments that it could use to sup­ply banks with funds; pre­vi­ously it had typ­i­cally only used one-day re­pos.


PERU: (left to right), South Korea’s Prime Min­is­ter Hwang Kyo-ahn In­done­sia’s Vice Pres­i­dent Jusuf Kalla, China’s Pres­i­dent Xi Jin­ping, Canada’s Min­is­ter for In­ter­na­tional Trade Chrys­tia Free­land, Aus­tralia’s Prime Min­is­ter Mal­colm Turn­bull, Peru’s Pres­i­dent Pe­dro Kuczyn­ski, Brunei’s Sul­tan Has­sanal Bolkiah, Chile’s Pres­i­dent Michelle Bachelet, Hong Kong’s Chief Ex­ec­u­tive Le­ung Chun-ying, Ja­pan’s Prime Min­is­ter Shinzo Abe and Malaysia’s Prime Min­is­ter Na­jib Razak, at­tend a meet­ing with busi­ness lead­ers dur­ing the an­nual Asia Pa­cific Eco­nomic Co­op­er­a­tion fo­rum in Lima yes­ter­day.

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