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Banks' Funding Costs and Lending Rates

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  • Cameron Deans

    (Reserve Bank of Australia)

  • Chris Stewart

    (Reserve Bank of Australia)

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    Abstract

    Over the past year, lending rates and funding costs have both fallen in absolute terms but have risen relative to the cash rate. The rise in funding costs, relative to the cash rate, reflects strong competition for deposits, particularly term deposits, and higher spreads on wholesale debt reflecting an increase in investors’ concerns about the global banking industry. While spreads have narrowed recently, they are still noticeably higher than they have been over the past couple of years. Over the past six months, lending rates have generally fallen by more than funding costs.

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    File URL: http://www.rba.gov.au/publications/bulletin/2012/mar/pdf/bu-0312-5.pdf
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    Bibliographic Info

    Article provided by Reserve Bank of Australia in its journal RBA Bulletin.

    Volume (Year): (2012)
    Issue (Month): (March)
    Pages: 37-43

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    Handle: RePEc:rba:rbabul:mar2012-05

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    Related research

    Keywords: funding costs; lending rates; interest rates; deposits; wholesale debt; net interest margin; funding composition; banks;

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