Bank Liabilities Survey - 2016 Q3

This quarterly survey of banks and building societies is aimed at improving our understanding of the role of lenders’ liabilities and capital in driving credit and monetary conditions.
Published on 14 October 2016

The 2016 Q3 survey was conducted between 23 August 2016 and 14 September 2016.


  • UK banks and building societies reported that their average cost of funding had fallen slightly in the three months to mid-September. Spreads on both retail deposits and ‘other’ funding — which includes wholesale debt funding and wholesale deposits — were reported to have fallen slightly. Both were expected to fall significantly in 2016 Q4.
  • Lenders reported that their total funding volumes had increased in 2016 Q3. Within the total, ‘other’ funding was reported to have increased slightly, while retail deposit funding was reported to be broadly unchanged. Lenders expected total funding volumes to remain broadly flat in 2016 Q4.
  • The proportion of wholesale market funding accounted for by long-term instruments increased in Q3, with the proportion of funding raised via senior unsecured debt increasing significantly. The proportion of funding raised via other instruments was either reported to have fallen or to have been unchanged in Q3.
  • Investor demand for banks’ wholesale debt increased slightly in 2016 Q3, with banks reporting that demand from hedge funds, in particular, had increased on the quarter. Lenders expected investor demand for wholesale debt to be unchanged in 2016 Q4.


  • Lenders reported that their total capital levels increased significantly in 2016 Q3, as expected. Capital levels were expected to decrease significantly in 2016 Q4. Lenders also reported that their average cost of capital decreased slightly in 2016 Q3, but it was expected to be unchanged in Q4.
  • Changes in balance sheet size were the key driver pushing up lenders’ demand for capital in Q3. Strategic decisions to increase risk and changes in the riskiness of assets also pushed up demand for capital on the quarter.

Transfer pricing

  • Lenders reported that the internal price charged to business units to fund the flow of new loans (the ‘transfer price’) decreased significantly in 2016 Q3. The falls in swap rates alongside lower spreads on long-term unsecured wholesale funding were reported to be the key factors reducing the transfer price, with lower spreads on secured long-term funding and lower spreads on retail deposits contributing to the fall as well. Lenders expected transfer prices to remain broadly unchanged in Q4.

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