Bank Liabilities Survey - 2018 Q1

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 12 April 2018

The 2018 Q1 survey was conducted between 19 February and 9 March 2018.

Funding

  • UK banks and building societies reported that their retail deposit funding volumes had decreased significantly in the three months to mid-March 2018, while their ‘other’ funding volumes — which includes wholesale debt funding, wholesale deposits and funding via central bank operations — had increased significantly over the same period (Chart 1). The overall net effect was that total funding volumes increased in Q1, and lenders expected this to increase further in Q2, driven largely by an expected pick-up in retail deposit funding.
  • Lenders reported that the supply of deposits from households fell significantly, pushing down on the total volume of deposits raised in Q1. The supply of deposits from private non-financial corporates was reported to have increased slightly in Q1, however, and was expected to increase significantly in Q2 (Chart 2).
  • Average spreads — relative to appropriate reference rates — on the stock of retail deposits from households and private non-financial corporations were reported to have increased slightly in Q1, while spreads on ‘other’ funding were reported to have increased for the first time since 2016 Q2 (Chart 3). Lenders expected both retail deposit and ‘other’ funding spreads to increase in Q2.
  • Investor demand for banks’ wholesale debt was reported to have decreased slightly in Q1, driven mainly by a fall in demand from non-UK investors. Lenders expected demand for wholesale debt from all investors to decrease further in Q2.
  • The proportion of wholesale market funding accounted for by long-term instruments was reported to have increased slightly in Q1. A variety of factors contributed to this, including regulatory drivers and the price/yield of instruments.

Capital

  • Lenders reported that their total capital levels decreased slightly in Q1, but were expected to increase significantly in Q2 (Chart 4), with changes in the economic outlook and regulatory drivers both expected to push up on demand for capital.
  • The average cost of capital was reported to have been unchanged in Q1, but was expected to increase slightly in Q2. If realised, that would be the first increase since 2016 Q1.

Transfer pricing

  • Lenders reported that the internal price charged to business units to fund the flow of new loans (the ‘transfer’ price) had increased in Q1 (Chart 5). This was reported to have been driven by a significant increase in swaps or other reference rates (Chart 6). Lenders expected a significant rise in the transfer price in Q2.

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