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Developments in bank funding costs in South Africa

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  • Mpho Rapapali
  • Daan Steenkamp

Abstract

This paper provides an assessment of developments in South African bank funding costs since the global financial crisis. We construct aggregate bank funding cost proxies by weighting the average cost of different forms of bank funding in South Africa and compare these to a summary measure of actual bank funding costs based on a one-off survey of major banks. We show that, in contrast to the behaviour of advanced economy banks, South African banks have not significantly adjusted their funding composition since the global financial crisis. We show that bank funding costs have increased over recent years, in line with higher money market liquidity premia, a higher policy rate and higher market interest rates. A one-off survey of the six largest banks suggests that our average funding cost proxy is within a plausible range of actual bank funding costs and follows a similar profile over time.

Suggested Citation

  • Mpho Rapapali & Daan Steenkamp, 2020. "Developments in bank funding costs in South Africa," Working Papers 9818, South African Reserve Bank.
  • Handle: RePEc:rbz:wpaper:9818
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    File URL: http://www.resbank.co.za/content/dam/sarb/publications/working-papers/2020/9818/WP-2001.pdf
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    References listed on IDEAS

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    1. Ching-Wai (Jeremy) Chiu & John Hill, 2018. "The Rate Elasticity of Retail Deposits in the United Kingdom: A Macroeconomic Investigation," International Journal of Central Banking, International Journal of Central Banking, vol. 14(2), pages 113-158, March.
    2. Tim Olds & Daan Steenkamp, 2021. "Estimates of banklevel funding costs in South Africa," Working Papers 11005, South African Reserve Bank.
    3. Eyollan Naidoo & Mukelani Nkuna & Daan Steenkamp, 2020. "Developments in debt issuance costs of South African banks," Working Papers 10157, South African Reserve Bank.
    4. Luchelle Soobyah & Daan Steenkamp, 2020. "Term premium and rate expectation estimates from the South African yield curve," Working Papers 9998, South African Reserve Bank.
    5. Anamaria Illes & Marco Lombardi & Paul Mizen, 2015. "Why did bank lending rates diverge from policy rates after the financial crisis?," BIS Working Papers 486, Bank for International Settlements.
    6. Bevan Cook & Daan Steenkamp, 2018. "Funding cost pass-through to mortgage rates," Reserve Bank of New Zealand Analytical Notes series AN2018/02, Reserve Bank of New Zealand.
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    Cited by:

    1. Daan Steenkamp & Tim Olds, 2021. "Estimates of bank-level funding costs in South Africa," Working Papers 857, Economic Research Southern Africa.
    2. Johannes W. Fedderke, 2020. "Is the Phillips curve framework still useful for understanding inflation dynamics in South Africa," Working Papers 10142, South African Reserve Bank.
    3. Ekaterina Pirozhkova & Jeffrey Rakgalakane & Luchelle Soobyah & Rudi Steinbach, 2023. "Enhancing the Quarterly Projection Model," Working Papers 11048, South African Reserve Bank.
    4. Christopher Loewald & David Faulkner & Konstantin Makrelov, 2020. "Time consistency and economic growth a case study of south african macroeconomic policy," Working Papers 10421, South African Reserve Bank.
    5. Eyollan Naidoo & Mukelani Nkuna & Daan Steenkamp, 2020. "Developments in debt issuance costs of South African banks," Working Papers 10157, South African Reserve Bank.
    6. Ekaterina Pirozhkova & Jeffrey Rakgalakane & Luchelle Soobyah Rudi Steinbach, 2023. "EnhancingtheQuarterlyProjectionModel," Working Papers 11044, South African Reserve Bank.
    7. Howard Diesel & Mukelani Nkuna & Tim Olds & Daan Steenkamp, 2022. "ThecostofcomplyingwithBaselIIIliquidityregulationsforSouthAfricanbanks," Working Papers 11032, South African Reserve Bank.

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