Flag of the Kingdom of Saudi Arabia
Moody’s stated that the robust exercise within the non-oil financial system in Saudi Arabia continues to reinforce demand for credit score, which exceeds the tempo of development of native deposits, indicating that Saudi banks are searching for to keep up their market share and make the most of the alternatives obtainable within the native market by looking for various sources of financing, together with from worldwide markets.
She added in her report that reliance on various financing sources will probably proceed, anticipating it to lower as credit score development slows and develops extra consistent with deposits.
She stated that financing sources embrace, along with native buyer deposits, capital market points, syndicated loans, and dollar-denominated devices, and the usage of further first-level devices continues to be frequent, however diversification to the second degree and different sorts of debt is growing, as the entire issuances of Saudi banks reached 56 billion riyals for all devices in 2024, which is greater than double the earlier 12 months, and it’s attainable to realize an analogous quantity of issuances in 2025. Nevertheless, it anticipated a gradual slowdown as banks search to realize alignment between mortgage development and deposit development.
She acknowledged that banks can receive liquidity by way of the Saudi Actual Property Refinancing Firm, anticipating that the function of banks within the mortgage market will regularly shift in the direction of the financing mannequin on the market, with the ultimate mortgage dangers transferred to the corporate and that banks will focus extra on the mortgage mannequin of financing on the market to scale back financing necessities because the market develops, whereas securitization and regulatory frameworks are more likely to witness additional growth.
She added that whereas market financing – particularly overseas financing – offers flexibility and the flexibility to achieve broader teams of traders, the fast improve in its use could expose banks to growing difficulties in refinancing, foreign money mismatches and sensitivity to altering world rates of interest, suggesting that calculated and well-managed diversification of financing sources – resembling prolonged and distant maturities and… Diversified financing in lots of areas — to reinforce the soundness of financing.
She identified that the Saudi Central Financial institution stays dedicated to sustaining monetary stability by strengthening supervisory requirements and introducing macroeconomic precautionary measures because the banking sector continues to face fast development and adjustments within the financing combine, because it intently screens banks’ overseas foreign money liquidity protection ratios and web steady sources of funding to make sure robust threat administration, regardless of the absence of particular regulatory restrictions. foreign money up to now.
