Saudi Arabia's central bank (SAMA) governor moved to ease worries about the health of the economy on Monday, saying no banks faced liquidity problems and the stock market rout was due to fear not fundamentals. He ruled out any merger trend in Saudi banks. “There is not even one (bank) close to confronting problems,” Hamad Saud Al-Sayyari told a press conference at SAMA headquarters in Riyadh Monday called to address the impact of current global economic developments on the Kingdom. “Banks in reality are in an excellent position.” Al-Sayyari said he had confidence in the local banks, and revealed that bank deposits in SAMA had exceeded SR25 billion while government spending has increased by 19% from last year. “All economic indexes prove there is a steady growth. Included in the indexes are investments and government spending activity, which have increased by 19% against last year, which is a strong signal of economic growth. Consumer and private investment spending are going through considerable growth.” “Loans in the local market have increased by 37% in the last nine months against 11% during the same period the previous year,” he said. “The agency (SAMA) is monitoring more than 40 indices of economic development in all areas of economic activity, all of which point to continuing growth in the Kingdom's economy. We are expecting good growth for this year and the momentum to continue into next year,” he said. “SAMA monitors liquidity constantly and is presently monitoring it on a daily basis. If we feel there is a need for measures we will not hesitate in taking them to suit the needs of the local market.” “In the third quarter deposits from abroad have exceeded Saudi bank assets abroad, which is a positive indication of high confidence in the banking system,” Al-Sayyari said. “The effects on the local stock market are purely psychological. What I know and I'm sure of is that the local situation is good and prospects for local growth are strong. Government spending is the catalyst for economic activity and confidence among foreign investors is still high.” The Saudi Arabian Monetary Agency, the Kingdom's central bank, has poured about $3 billion liquidity into bank deposits over the past two weeks, the governor said. Al-Sayyari also said there was no need for fear over the safety of bank deposits. He reiterated that Saudi Arabia's Supreme Economic Council has offered guarantees for bank deposits. The economic council, Saudi Arabia's highest economic body, said on Oct. 16 the government would “continue to ensure the health of Saudi banks and bank deposits.” Al-Sayyari said that there has been no panic or withdrawals of deposits from local banks due to high confidence in local banks and the Kingdom's financial system. “Our market is free and open and we should not stop anyone who wants to liquefy his deposits,” he said. Al-Sayyari's assurances came as the world's largest oil exporter saw its bourse tumble 4.15 percent to its lowest level in at least two years. The index, the Arab world's largest exchange, is down some 50 percent this year. He blamed the market's decline on poor investment sentiment stemming from the global financial crisis, not economic fundamentals. __
