Fahad Al-Mubarak

Saudi commercial banks have plenty of cash, Saudi central bank governor Fahad Al-Mubarak said on Monday.

Mubarak told Saudi-owned Ekhbariya Television that the increase in money rates, which he described as “slight”, was due to expectations for higher US interest rates, and also related to seasonal factors towards the end of each year.

The three-month Saudi interbank offered rate jumped to 1.00375 percent on Monday, its highest level since 2009, from around 0.78 percent in late July.

Low oil prices have cut new oil revenues flowing into Saudi banks, while the government has started issuing about SR20 billion ($5.3 billion) of bonds every month.

Mubarak told Ekhbariya that commercial banks still had deposits of about SR200 billion at the central bank, which they could use to finance their activities.

“As for the slight increase which occurred in the cost of financing between banks recently, it is a result of expectations among local banks for a rise in the US interest rate and the effects of that on the local rate,” he said.

Mubarak added “this phenomenon happens every year in the last quarter of the financial year – we see that there is intense competition” for funds.

Mubarak rejected as unjustified the decision of Standard & Poor’s at the end of last month to downgrade Saudi Arabia’s sovereign debt ratings.

Saudi officials have insisted they have plans in place to stabilize state finances.

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