FACTBOX-What to watch in Saudi credit crisis

June 18 (Reuters) - Saudi Arabia is facing a mounting bank
lending crisis, with domestic lending stalled in part over
concerns that troubles at two key conglomerates will spread and
with confidence faltering.

The Saudi Arabia Monetary Agency (SAMA) is expected to
further cut interest rates or reserve requirements to kickstart
lending, but analysts worry that may not be enough to restore
bank confidence.

On Tuesday, it sought to boost lending by halving the rate
it pays to commercial banks when they deposit money with the
central bank by lowering its reverse repo rate from 50 basis
points to 25. It left the benchmark repurchase rate unchanged at
2 percent. [ID:nLG723080]

Below are some of the key points to watch identified by
Reuters correspondents in the region.

FAMILY BUSINESS TURMOIL

- Problems at Saad Group and Ahmad Hamad al-Gosaibi & Bros
Co (AHAB) have heightened bankers' cautiousness towards lending
and raised concerns over the real impact of the global financial
crisis on a large and secretive network of family businesses.

The outcome of any restructuring and any possible steps by
the government toward helping family-owned business through the
crisis will prove crucial for lending sentiment.

In the worst case scenario, the two firms would represent
one of the biggest defaults to hit the region since the onset of
the global financial crisis.

SAMA has not made any comment about the issue.

A newspaper reported on Tuesday both firms were looking to
restructure some $10 billion in debt and would be talking to
their creditors in Saudi Arabia, Bahrain and Britain. It was the
first time a figure had been given for the size of the debt
[ID:nLG841566].

Central bank governors from Oman and United Arab Emirates
said on Monday Gulf Arab banks had more exposure to the two
firms than previously thought, the latest setback for lenders
recovering from a regional liquidity crunch [ID:nLF540002]

CREDIT DATA

- The Saudi central bank is due to release May's monthly
money supply and credit growth data before the end of June.
Analysts do not expect the data to indicate any pickup from
April.

"On a net basis, (Saudi) banks have not ... lent any new
credit since September," says Caroline Grady, economist at
Deutsche Bank.

The May data should indicate how urgent it is for SAMA to
cut its benchmark lending rate.

EARNINGS

- As of the second week of July, listed Saudi banks will
start announcing their second-quarter earnings. These should
provide an idea about the amount of any provisions lenders have
made for bad loans. But some lenders could delay this process to
the fourth quarter of 2009.

MORTGAGE LAW

- A proposed new mortgage law, which has been in the works
for almost a decade, could reverse the banking sector's fortunes
if it was to be implemented this year, as the government
expects. The law is now under final review by the cabinet.

Saudi Arabia has one of the lowest home ownership ratios
among the oil-exporting Gulf Arab countries.

THE BOND MARKET

- The government announced this month the launch of a market
for bonds and Islamic bonds responding to a long-standing demand
by some firms to diversify sources of financing amid tight
credit conditions.

Analysts say the launch by the Saudi government of a maiden
sovereign Islamic bond issue would be crucial to the success of
the plan since it will provide a pricing measure for issues by
firms.
(Compiled by Souhail Karam, Editing by Thomas Atkins and Peter
Apps/Toby Chopra)