Saudi central bank pumps $3bn into banks

The Saudi Arabian Monetary Agency (SAMA), the kingdom's central bank, also provided riyal liquidity and the bankers said it may add more US dollar funds to the system given current conditions. The bankers said SAMA had deposited between $200-$350 million with each bank.

The global financial crisis has created tight credit conditions for banks, forcing governments and central banks around the world to provide liquidity to defrost interbank lending.

The three-month Saudi Interbank Offered Rate stood at 4.65125 per cent and is likely to fall after the latest attempt to ease credit conditions.

SAMA made a rare repurchase rate cut on October 12 - to 5 per cent from 5.5 per cent - and also lowered reserve requirements to give increased liquidity to banks. It was the first repo rate move since February 2007 and the first cut in four years.

Saudi, which pegs its currency to the US dollar, normally adjusts the reverse repo rate - the deposit rate at SAMA - as it tracks the US Federal Reserve.

Meanwhile, the reserve change was expected to release about 10 billion riyals ($2.67 billion) to commercial banks from funds held in the central bank as cash reserves.

That move had sent a signal to markets that the kingdom, which has long insisted it had the means to support its economy and banking sector if necessary, was prepared to take required action.

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