Developments in Banks' Funding Costs and Lending Rates

Eduardo Tellez
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Eduardo Tellez: Reserve Bank of Australia

RBA Bulletin (Print copy discontinued), 2015, 55-62

Abstract: This article updates previous Reserve Bank research on how developments in the composition and pricing of banks’ funding have affected their overall cost of funding and the setting of lending rates. The main finding is that the spread between the major banks’ outstanding funding costs and the cash rate narrowed a little over 2014. This was due to slightly lower costs of deposits combined with a more favourable mix of deposit funding. The contribution of wholesale funding to the narrowing was marginal as more favourable conditions in long-term debt markets were mostly offset by a rise in the cost of short-term debt. Lending rates declined a little more than funding costs, reflecting competitive pressures.

Keywords: funding costs; lending rates; interest rates; deposits; deposit competition; wholesale debt; wholesale funding; funding composition; bank funding; banks; net interest margin (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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