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Estimates of bank-level funding costs in South Africa

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  • Tim Olds

  • Daan Steenkamp

Abstract

We develop a new dataset of bank-level balance sheets data to estimate bank-level funding costs. These estimates are useful for monitoring of funding pressures and other risks to the banking sector as well as understanding the impact of prudential regulations and market conditions on the transmission of monetary policy. We show that bank funding cost spreads are materially higher now than before the Global Financial Crisis of 2008, in spite of lower interest rates. During the Covid-19 crisis, we show that aggregate funding costs have fallen in level (i.e. percentage) terms, but that funding costs have increased when expressed relative to reference rates. We show that the relative cost of raising deposits has increased, as deposit rates have not fallen by as much as the repurchase rate and other money market rates.

Suggested Citation

  • Tim Olds & Daan Steenkamp, 2021. "Estimates of bank-level funding costs in South Africa," ERSA Working Paper Series, Economic Research Southern Africa, vol. 0.
    • Handle: RePEc:rza:ersawp:v::y:2021:i::id:67
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    File URL: https://ersawps.org/index.php/working-paper-series/article/view/67/44
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    Cited by:

    1. is not listed on IDEAS
    2. Greenwood-Nimmo, Matthew & Steenkamp, Daan & van Jaarsveld, Rossouw, 2024. "A bank-level analysis of interest rate pass-through in South Africa," Journal of Macroeconomics, Elsevier, vol. 82(C).
    3. Erasmus, Ruan & Steenkamp, Daan, 2022. "South Africa’s yield curve conundrum," MPRA Paper 115398, University Library of Munich, Germany.
    4. Mpho Rapapali & Daan Steenkamp, 2020. "Developments in bank funding costs in South Africa," Working Papers 9818, South African Reserve Bank.
    5. Ricardo Hausmann & Federico Sturzenegger & Patricio Goldstein & Frank Muci & Douglas Barrios, 2022. "Macroeconomic risks after a decade of microeconomic turbulence: South Africa (2007-2020)," WIDER Working Paper Series wp-2022-3, World Institute for Development Economic Research (UNU-WIDER).
    6. Howard Diesel & Mukelani Nkuna & Tim Olds & Daan Steenkamp, 2022. "ThecostofcomplyingwithBaselIIIliquidityregulationsforSouthAfricanbanks," Working Papers 11032, South African Reserve Bank.

    More about this item

    Keywords

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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