DUBAI (Reuters) - Kingdom Holding’s plan to borrow money to fund new investments has stalled because owner Prince Alwaleed bin Talal has been detained in Saudi Arabia’s anti-corruption crackdown, according to four banking sources familiar with the matter.

FILE PHOTO - Saudi billionaire Prince AlWaleed bin Talal looks on during a news briefing in Manama, May 8, 2012. REUTERS/Hamad I Mohammed/File Photo

Kingdom 4280.SE had approached banks to obtain the loan, but the financing plan has been held up because the lenders are worried about potential repercussions if they lend to the prince's company, the sources said.

One of the sources, who was approached for the loan, said it would have been worth roughly 5 billion riyals ($1.3 billion).

A financing hold-up for Kingdom - a leading Saudi investment firm with stakes in prime real estate including New York’s Plaza Hotel and London’s Savoy Hotel - would suggest the crackdown this month is slowing new Saudi business activity.

Asked for comment, Kingdom’s Chief Financial Officer Mohammed Fahmy said his company had not asked any bank for a formal loan commitment. He said that terms of any financing deal were never finalised.

More than 200 people were questioned and dozens of princes, officials and top businessmen detained in the anti-corruption purge. Over 2,000 bank accounts have been frozen by investigators, commercial bankers told Reuters.

The Riyadh government has said the economy will not suffer because investigators are targeting only individuals, not their companies, which can continue to operate as normal.

In a statement issued soon after Prince Alwaleed was detained two weeks ago, Kingdom also said it was continuing to operate normally, and that it had the support of the government.

But a loan hold-up would suggest some damage to the economy may be inevitable as banks, uncertain of the fate of majority owners of companies and unsure how far the crackdown will extend, become reluctant to extend new financing.

PRINCE ALLEGATIONS

Kingdom completed the acquisition of a 16.2 percent stake in local lender Banque Saudi Fransi (BSF) 1050.SE in September, buying about half of France's Credit Agricole stake in BSF for 5.76 billion riyals.

The company approached banks to obtain a loan that would have been secured by its BSF stake, as the company wanted to leverage the newly acquired shares in order to make new investments, according to the sources.

Kingdom’s share price has plunged 19 percent in the past two weeks, erasing about $1.9 billion of market value. The allegations against Prince Alwaleed, who owns 95 percent of Kingdom, include money laundering, bribery and extorting officials, a Saudi official has previously told Reuters.

The allegations could not be independently verified.

One of the four sources, a senior banker at a Saudi financial institution, said the loan deal would not go ahead until the situation facing the prince was resolved.

Eight Saudi and international bankers, including the four sources, said in addition to the Kingdom loan, a range of other transactions involving clients who are directly or indirectly involved in the detentions had also been put on hold.

Banks have not reached the point of recalling existing loans, but they have increased the level of scrutiny for some new financing, the bankers said.

In a report last week, debt rating agency Moody’s said a prolonged freeze of bank accounts in Saudi Arabia could damage corporate credit quality in the kingdom because large depositors were often large borrowers and business owners.

“Saudi Arabia’s corporate sector remains dominated by unlisted family-owned businesses with uneven governance and disclosures and frequent intermingling of individual and corporate activities, which ultimately could expose corporates to these individuals’ frozen accounts,” Moody’s said.