Saudi Arabian Monetary Authority (SAMA), the central bank of Saudi Arabia, has said it will inject SR50 billion ($13.33 billion) in the banking sector to enhance its liquidity. The central bank decision to inject such a large amount of cash into the banking sector in the form of a one-year free deposit is rooted in its role of promoting financial stability. This will help the wider banking sector to continue to provide credit to borrowers during this challenging period. Total assets of the banking sector have increased by about 14 percent to SR2.7 trillion in the first quarter compared with a year earlier. Likewise, credit facilities granted to the private sector jumped by about 12 percent over the same period. The average capital adequacy ratio was a healthy 18.6 percent (more than twice the level required by Basel rules). Finally, average liquidity coverage (LCR) reached 201 percent and the net stable financing (NSFR) ratio reached about 126 percent. Considering such healthy numbers one could ask why the regulator feels the need to bolster the banking sector with such an enormous pile of cash. SAMA has always made sure there is enough liquidity in the monetary system in general and in the banking sector in particular. This latest injection of liquidity is born from the desire to ensure that small businesses are properly supported and protected from the impact of the coronavirus pandemic. In fact such support is part of several financial stimulus programs spearheaded by SAMA since the start of COVID-19 outbreak. An earlier financial stimulus program was launched by SAMA worth some SR50 billion that was aimed at supporting the private sector to promote economic growth. Through these support measures, local lenders will be able revise or restructure loans to businesses with no additional charges. This will in turn support employment as companies will be under reduced pressure to lay off staff. • Talat Zaki Hafiz is an economist and financial analyst. Twitter: @TalatHafiz Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News" point-of-view