Bank Liabilities Survey - 2016 Q4

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 13 January 2017

The 2016 Q4 survey was conducted between 21 November 2016 and 9 December 2016.


  • UK banks and building societies reported that total funding volumes had increased slightly in the three months to mid-December 2016. Within the total, retail deposit funding was reported to be unchanged, while ‘other’ funding — which includes wholesale debt funding, wholesale deposits and funding via central bank operations — was reported to have increased. Lenders expected total funding volumes to decrease in 2017 Q1.
  • Spreads — relative to appropriate reference rates — on ‘other’ funding were reported to have decreased significantly in 2016 Q4, with spreads on retail deposits having also fallen. Lenders expected further significant falls in spreads on retail deposits in 2017 Q1.
  • The proportion of wholesale market funding raised through long-term instruments decreased significantly in 2016 Q4, the first fall reported since 2014 Q1. Lenders expected further falls in 2017 Q1. Changing balance sheet size, price and non-price terms were reported to be the main factors pushing down on lenders’ demand for long-term wholesale debt funding in Q4, with regulatory drivers significantly pushing up on their demand for short-term wholesale debt funding.
  • Investor demand for banks’ wholesale debt was broadly unchanged in 2016 Q4, although banks reported that demand from money market funds had decreased. Lenders expected investor demand for wholesale debt to be unchanged in 2017 Q1.


  • Lenders reported that their total capital levels increased in 2016 Q4. Lenders also reported their average cost of capital decreased in Q4.
  • The main factors pushing up on lenders’ demand for capital in Q4 were a changing economic outlook, changes in balance sheet size and regulatory drivers.
  • Regulatory drivers were reported to have increased lenders’ demand for additional Tier 1 and Tier 2 capital instruments, relative to common equity, in Q4.

Transfer pricing

  • Lenders reported that the internal price charged to business units to fund the flow of new loans (the ‘transfer price’) had decreased for the second consecutive quarter in Q4. This was reportedly driven by falls in spreads on both retail deposits and wholesale funding — in particular on long-term unsecured wholesale funding. In the other direction, lenders reported that swaps or other reference rates had pushed ‘transfer prices’ upwards significantly. Lenders expected transfer prices to fall slightly in 2017 Q1.

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