Loan-to-deposit reform and deposit maturity: evidence from Saudi Arabia

This study investigates the impact of the Saudi Central Bank’s (SAMA) 2018 liquidity reforms on banks’ financing capacity, focusing on its moderating impact on the relationship between time and savings deposits and banks’ loan-to-deposit (LDR) levels. Using aggregated data of banks in Saudi Arabia from 2013 to 2024, the findings indicate that SAMA was successful in encouraging banks to hold more stable and longer-maturity deposits to support their lending activities. Specifically, the 2018 LDR macroprudential liquidity reforms enforced by SAMA are found to have positively influenced banks’ acquisition of longer maturity deposits in the long run. Based on these findings, the study recommends that SAMA should consider increasing the weights assigned to longer-maturity deposits, thereby enhancing financial stability while supporting banks’ financing capacity against rising credit demand.