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Saudi central bank tweaks loan-deposit policy

New rules will introduce a weighting system for calculating deposits, in move aimed at boosting lending

Gulf News

Dubai: Saudi Arabia’s central bank has instructed banks to change the way they calculate their loan-to-deposit ratios, giving greater weight to long-term deposits in order to permit more lending, according to a report on the Maaal financial news website. The new rules, set to come into effect in early April, will introduce a weighting system for calculating a bank’s deposits, ranging from 100 per cent for the face value of deposits on demand to 190 per cent for deposits of over five years, Maaal quoted unnamed sources as saying.

The kingdom’s maximum loan-to-deposit ratio for commercial banks will remain at 90 per cent, said the report, but by increasing the value of deposits in the calculation, the new system will give more room for loans to increase.

The Saudi central bank did not immediately respond to a request for comment on the Maaal report.