* Talal Al-Sayah from Riyadh
The average interest rates among banks operating in Saudi Arabia rose by an average of three months to 2.8052 per cent by the end of November 2018, against 2.7386 per cent at the end of October.
According to an analysis of the reports unit in the newspaper "AlEqtisadiah" that is based on the data of the Saudi Arabian Monetary Agency (SAMA), the average interest rates between Saudi banks in November last year grew for the 13th month running since November 2017 at 1.8078 per cent.
The average interest rates among banks operating in Saudi Arabia "average three months" or so-called "Cyber" by the end of November 2018 is in its highest level since December 2008 "about ten years or 120 months."
The main reason for the rise in average interbank rates in Saudi Arabia was the "average three months" or so-called "cyber", as the increase in the rate of reverse repo agreements issued by the Saudi Arabian Monetary Agency (SAMA) that was boosted by the US Federal Reserve's interest rate hike.
According to the Unit, the rate of interest between banks is expected to continue as the "Cyber" rise in 2019 for two reasons.
The first is for higher interest rates on reverse repurchase agreements "reverse repo" linked to the interest rate decision issued by the US Federal Reserve, the higher the rate of reverse repurchase agreements and the lower the banks' financial surpluses to lend to the Central Bank to lend against the reverse repo rate, as banks refer to the Central Bank for safety factor as it is a government agency.
Another reason for the rise in interest rates among banks is the excessive financial surpluses on their reserves, as there are periods in 2018 that SAMA proved the reverse repo rate, but Cyber continued to grow due to a drop-in bank surplus.
SAMA always follows the US Federal Reserve to raise or lower interest rates, as the exchange rate of the riyal against the US dollar is unchanged.
The rate of reverse repo agreements is known as "reverse repo", which happens when a bank has financial surpluses and cannot lend to the central bank or other banks to lend them for a certain interest, which is called the rate of reverse repurchase agreements "reverse repo".
The rate of repo agreements means that when a bank needs money goes to the central bank or any other bank to borrow from it at a certain interest rate, which is known as the benefit of repurchase agreements.
While Cyber is defined as the interest rate that banks borrow from each other, usually from their excess reserves.
It is not a requirement that Cyber is less than the repo rate, but "cyber" must be higher than the interest rate in reverse repurchase agreements.
The decision to raise the US interest rate during the last year 2018 has been done four times from 1.50 per cent at the end of 2017 to 1.75 per cent in late March 2018 and then to 2.00 per cent in mid-June 2018, to 2.25 per cent by the end of September 2018, and 2.50 per cent at the end of December 2018.
Interest in 2017 also increased three times from 0.75 per cent in late December 2016 to 1.00 per cent in mid-March 2017, to 1.25 per cent in mid-June 2017 and 1.5 per cent in mid-December 2017.
As a result, SAMA increased the rate of reverse repurchase agreements from 1.5 per cent to 1.75 per cent, then to 2.00 per cent, to 2.25 per cent.
The latest was in December 2018 to 2.50 per cent.
The institution also raised the repo rate from 2.00 percent to 2.25 percent, then to 2.50 percent, to 2.75 per cent and the latest in December 2018 to 3.00 per cent.
Therefore, the effect of the leverage on the reverse repurchase agreements, reverse repo and repo rate, in inter-bank interest rates in Saudi Arabia.
* Economic Reports Unit
