Changes in the loan-deposit gap and in its funding in the current decade

In recent years various factors have influenced the difference between the loans extended by credit institutions and the funds received by them in deposits. Some have assisted the strong growth of the funding received (such as the marked buoyancy of economic activity, the notable momentum of the real estate sector and the low cost of borrowing), while others have limited the expansion of funds from customers (such as the increased competition from other alternative financial products and the decline in national saving). Spanish financial institutions had been covering this gap mainly by issuing fixed-income securities on the international markets, taking advantage of the conditions created by Spain’s membership of the euro area. This situation has, however, been altered recently by the serious international financial tensions of the last year-and-a-half. This article describes the recent behaviour of the gap between loans and deposits and of its funding, and discusses some implications for financial intermediaries and for the Spanish economy. The article consists of this introduction and three other sections. The following section addresses the factors which have led to this behaviour, the third section summarises the changes in the liability structure of institutions and the fourth sets out the main conclusions.