Current Status
On Track — Saudi Arabia’s financial system liquidity has remained adequate to support Vision 2030’s ambitious investment and lending programmes, with broad money supply (M3) growing at approximately 8 to 10 per cent annually and the banking system maintaining healthy capitalisation and liquidity ratios.
Key Metrics
| Metric | Value |
|---|---|
| M3 Money Supply (2016) | SAR 1.76T |
| M3 Money Supply (2024) | SAR 2.75T (est.) |
| M3 Growth (2024) | ~8.5% y/y |
| Bank Credit Growth | ~10.2% y/y |
| Loan-to-Deposit Ratio | ~95% |
| Banking Sector Capital Adequacy | 19.2% |
| Non-Performing Loans | 1.6% |
| SAMA Reverse Repo Rate | 5.50% |
Trend Analysis
Saudi Arabia’s financial system has successfully navigated the complex demands of simultaneously funding Vision 2030’s massive investment programme, supporting mortgage market expansion, and maintaining the banking system’s stability. Broad money supply (M3) has grown by approximately 56 per cent since 2016, from SAR 1.76 trillion to an estimated SAR 2.75 trillion, reflecting credit expansion, deposit growth, and the multiplication effects of a dynamic economy.
The most significant structural shift in the liquidity landscape has been the explosive growth of mortgage lending. From a base of approximately SAR 117 billion in 2016, outstanding real estate loans have grown to over SAR 700 billion by 2024 — accounting for the single largest component of credit growth. This expansion was essential for achieving the Home Ownership Rate target but has progressively tightened banking sector liquidity. The loan-to-deposit ratio has risen from approximately 80 per cent to 95 per cent, approaching levels that require careful management. SAMA has responded by introducing supplementary funding mechanisms, adjusting reserve requirements, and facilitating bank capital raising through the issuance of Additional Tier 1 (AT1) bonds.
Despite the credit expansion, the banking system remains conservatively managed and well-capitalised. The capital adequacy ratio of 19.2 per cent is well above the Basel III minimum of 10.5 per cent and above most regional peers. Non-performing loans at 1.6 per cent reflect robust credit quality, supported by prudent underwriting standards and the strong collateral base of the mortgage portfolio. SAMA’s interest rate policy follows the US Federal Reserve due to the SAR-USD peg, with the reverse repo rate at 5.50 per cent providing a relatively tight monetary environment that has helped contain inflationary pressures while supporting the currency peg.
Methodology
Liquidity and money supply metrics are compiled and published by the Saudi Central Bank (SAMA) in its monthly statistical bulletin. M3 (broad money supply) includes currency in circulation, demand deposits, time and savings deposits, and other quasi-monetary deposits. Bank credit data covers loans extended by commercial banks and is broken down by sector and type. The loan-to-deposit ratio is calculated as total bank loans divided by total customer deposits. Capital adequacy ratios are calculated under Basel III standards and reported quarterly by each bank, with SAMA publishing aggregate figures. Non-performing loans follow SAMA’s classification criteria aligned with Basel standards, with exposures classified as non-performing when more than 90 days past due.
Related Priorities
Financial system liquidity is an enabling condition for virtually all Vision 2030 economic objectives. Adequate liquidity supports mortgage lending (Home Ownership Rate), SME credit (SME GDP Contribution), corporate investment (Private Sector GDP Contribution), and project finance (giga-project development). The Financial Sector Development Programme has expanded the range of funding instruments available — including sukuk, covered bonds, and securitisation — diversifying funding sources beyond traditional deposits. Capital market development, including Tadawul’s growing bond market, provides alternative funding channels that reduce dependence on bank balance sheets.
Outlook
The liquidity outlook through 2030 requires careful management as competing demands on the financial system intensify. Continued mortgage growth, giga-project financing needs, and private-sector credit demand will place ongoing pressure on bank balance sheets. The loan-to-deposit ratio is approaching levels that may constrain further credit expansion without additional funding sources. Key mitigation measures include SAMA’s introduction of liquidity coverage ratio flexibility, the development of the covered bond market, deposit-gathering initiatives by banks, and the potential for SAMA to provide long-term funding facilities.
The Vanderbilt Portfolio views the Saudi banking system as fundamentally sound, with strong capitalisation and low credit risk providing ample buffer. However, the liquidity position requires proactive management to avoid becoming a binding constraint on Vision 2030 implementation. The development of the capital market as an alternative funding channel — including the sukuk market, which has grown to over SAR 300 billion outstanding — is a critical structural response to this challenge. Financial system stability is expected to be maintained through 2030 with appropriate policy calibration.