UPDATE 2-Saudi cbank says no need for emergency liquidity

(Recasts with fresh comments)

By Lin Noueihed

DUBAI, Oct 8 (Reuters) - Saudi Arabia's central bank said on Wednesday there was no need to provide emergency funds to banks in the world's largest oil exporter as the financial sector faced no shortage in liquidity.

Muhammed al-Jasser, central bank vice governor, said in comments carried by the state SPA news agency that the central bank was ready to provide sufficient liquidity if needed but no bank had approached it for additional funds.

"The situation is stable and does not require any emergency measures as if there were a problem with the banks meeting their commitments," he told Al Arabiya television later on Wednesday.

The comments come on a day when Britain announced plans to inject up to 50 billion pounds ($87.2 billion) into its biggest retail banks on Wednesday and neighbouring Kuwait slashed its benchmark interest rate by 125 basis points, one of its biggest ever rate cuts, to help ease the fallout from the global crunch.

Fellow Gulf Arab oil-exporter, the United Arab Emirates, announced a 50 billion dirham emergency lending facility last month in a bid to ease a liquidity squeeze that has pushed up interbank borrowing rates in recent weeks.

The Saudi interbank rate rose on Wednesday but Jasser said that reflected a high demand for borrowing in a booming economy and that local banks had no trouble meeting commitments.

Jasser said Saudi banks already held about 200 billion riyals in government paper with the option to borrow up to 75 percent of the value of the securities, or around 150 billion riyals. None had so far chosen to exercise this option.

Bank deposits were safe and economic growth healthy, he said, adding Saudi Arabia had no exposure to economies and companies suffering from the global credit crunch or sub-prime problems since most lending was local.

"The monetary authority is monitoring the market and continually following developments closely and is ready to provide any sufficient liquidity should the market need it," Jasser said in comments late on Tuesday.

"There is no need to fear that deposits will be affected by the global financial crisis."

STOCK DECLINES UNWARRANTED

Six Saudi banks launched a concerted effort to restore confidence on Tuesday, saying they had no direct exposure to toxic mortgages as shares plunged on fears about the impact of the global financial crisis.

Saudi Arabia's main stock index .TASI fell near the 10 percent limit on Monday and shed another 7 percent on Tuesday.