The Rise in Loan-to-Deposit Ratios: Is 80 the New 60?
James DiSalvo and
Economic Insights, 2017, vol. 2, issue 3, 18-23
Liquidity ratios at small banks have climbed in recent decades. Why has this happened? Should regulators be concerned? A traditional signal that a bank may not have enough liquid assets to cover a sudden loss of funding has increased dramatically at small banks in recent decades. Small banks? median ratio of the value of their loans outstanding to the value of their deposits has risen from around 60 percent in the second half of the 1980s to around 80 percent today. Meanwhile, the same measure of liquidity has increased about 5 percentage points at large banks. How can we explain this big increase in loan-to-deposit (LTD) ratios among small banks? Are higher LTD ratios here to stay? Do they pose risks to the safety and soundness of our small banks?
Keywords: liquid assets; LTD; loan to deposit ratio; loans (search for similar items in EconPapers)
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Journal Article: The Rise in Loan-to-Deposit Ratios: Is 80 the New 60? (2017)
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