Banks face a USD 152 bn liquidity gap as regional tensions threaten to spike funding costs

The escalation is testing the liquidity buffers of Saudi banks, threatening to drive up the cost of wholesale funding just as lenders need it most to finance Vision 2030. A prolonged regional conflict could trigger between USD 111-260 bn in deposit outflows across the broader GCC, according to a recent Bloomberg Intelligence report picked up by Asharq Business and an article by Fitch Solutions’ research unit BMI.

Saudi banks are heading into this storm with less structural liquidity than their regional peers. The Kingdom’s banking sector is currently sitting on a negative cashflow gap of SAR 572 bn (USD 152 bn), equating to roughly 12% of total assets. Some lenders, including Bank Al Jazira, Saib, Saudi Awwal Bank, Banque Saudi Fransi, and Alinma, are showing notable negative liquidity gaps.

Why it matters

The real vulnerability for Saudi lenders is the wholesale debt market. Since 2022, Saudi banks have aggressively expanded their reliance on short-term external funding, such as certificates of deposit, which now make up 28% of their funding sources.

If airspace closures, trade disruptions, and war-risk premiums persist, the cost of this vital cross-border funding will spike, squeezing net interest margins and potentially slowing capital accumulation. This dynamic could ultimately complicate the massive pipeline of corporate lending required to back the Kingdom’s gigaprojects.

The silver lining? High oil prices and heavy state backing. Elevated oil prices translate directly into stronger government revenues, providing a crucial tailwind for state deposits. Government and state-linked entities already account for 32% of all deposits in the Saudi banking sector, offering a massive domestic firewall against external shocks.

ALSO- Expats make up only 44% of the Kingdom's population — meaning Saudi banks are far less exposed to the sudden “flight to safety” retail withdrawals currently threatening the UAE.