Explanatory Notes - Wholesale
Base rates of selected retail banks
The base rates of Barclays, Lloyds TSB, HSBC and National Westminster banks only are used to compile this series. Each of these has a single base rate, which may differ from those of other banks in the sample - a spread is shown when this occurs.
Prior to 16 September 1971, the London Clearing Banks maintained interest rate agreements in that they charged the same minimum rates on advances to industrial and commercial companies and paid the same rates on deposits. Both rates were linked to Bank Rate with the rate on advances at a fixed margin above Bank Rate and the deposit rates (normally 7 days) at a fixed 2% below.
With the introduction of Minimum Lending Rate (MLR) on 13 October 1972
and the ending of this agreement, the London Clearing Banks generally
linked their base rates to MLR. However, with the introduction of Band
1 dealing rates on 20 August 1981 , their individually declared base
rates moved more flexibly in response to market developments because
the Bank of England’s "stop" rate in its open market
operations was no longer published. A consequence of this was a more
flexible market-related pricing of overdraft facilities. However, the
final lifting of the clearing banks lending ceilings saw a surge in the
use of the interbank market to finance lending at rates closely related
to money-market rates, which vary daily.
