Bank funding costs: what are they, what determines them and why do they matter?

Emily Beau (), John Hill, Tanveer Hussain () and Dan Nixon ()
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Emily Beau: Bank of England
John Hill: Bank of England
Tanveer Hussain: Bank of England
Dan Nixon: Bank of England

Bank of England Quarterly Bulletin, 2014, vol. 54, issue 4, 370-384

Abstract: A bank needs to finance its activities, and the cost of bank funding affects a wide range of economic variables with important implications for both monetary and financial stability. This article sets out what bank funding costs are in simple terms, using an analogy of two buckets on a pair of scales to help explain the dynamic nature of bank funding and bank lending. It also introduces a simple framework for analysing the main drivers of funding costs.

Date: 2014
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