The Effects of Funding Costs and Risk on Banks' Lending Rates
After falling for over a decade, the major banks' net interest margins appear to have stabilised in a relatively narrow range in recent years. In the early part of the financial crisis, margins fell to the bottom of this range, reflecting an increase in debt funding costs. Margins have since recovered a little, to around the middle of the range, as a result of some repricing of lending rates relative to these costs. In addition to the increase in the cost of debt funding, there have been other drivers of the rise in lending rates relative to the cash rate. First, the banks have increased their equity funding, which is more costly than debt finance. Second, risk margins on loans have risen to account for higher expected losses.
Volume (Year): (2011)
Issue (Month): (March)
|Contact details of provider:|| Postal: GPO Box 3947, Sydney NSW 2001|
Web page: http://www.rba.gov.au/
More information through EDIRC
|Order Information:||Web: http://www.rba.gov.au/order-form/index.html|
When requesting a correction, please mention this item's handle: RePEc:rba:rbabul:mar2011-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew)
If references are entirely missing, you can add them using this form.