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Recent Developments in Banks' Funding Costs and Lending Rates


  • Anna Brown

    (Reserve Bank of Australia)

  • Michael Davies

    (Reserve Bank of Australia)

  • Daniel Fabbro

    (Reserve Bank of Australia)

  • Tegan Hanrick

    (Reserve Bank of Australia)


The global financial crisis has affected the cost and composition of Australian banks’ funding, with flow-on effects to their lending rates and net interest margins. Since mid 2007, Australian banks’ overall funding costs have risen significantly relative to the cash rate, mainly reflecting the higher cost of deposits and long-term wholesale debt, and changes in their funding mix. Australian banks’ lending rates have also risen significantly relative to the cash rate. For the major banks, the increases in lending rates have more than fully offset their higher funding costs, with their net interest margins in late 2009 about 20–25 basis points above pre-crisis levels. Since then, margins may have narrowed slightly.

Suggested Citation

  • Anna Brown & Michael Davies & Daniel Fabbro & Tegan Hanrick, 2010. "Recent Developments in Banks' Funding Costs and Lending Rates," RBA Bulletin, Reserve Bank of Australia, pages 35-44, March.
  • Handle: RePEc:rba:rbabul:mar2010-06

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    References listed on IDEAS

    1. Susan Black & Anthony Brassil & Mark Hack, 2010. "Recent Trends in Australian Banks' Bond Issuance," RBA Bulletin, Reserve Bank of Australia, pages 27-33, March.
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    Cited by:

    1. Clemens Bonner, 2016. "Preferential Regulatory Treatment and Banks' Demand for Government Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1195-1221, September.
    2. Ming-Hua Liu & Dimitris Margaritis & Zhuo Qiao, 2016. "The Global Financial Crisis and Retail Interest Rate Pass-Through in Australia," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-32, December.


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