Bank Liabilities Survey - 2018 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 17 January 2019

The 2018 Q4 survey was conducted between 19 November and 7 December 2018.

Funding

  • UK banks and building societies reported that their total funding volumes increased significantly in the three months to end-November 2018 (Q4). Within the total, ‘other’ funding — which includes wholesale debt funding, wholesale deposits and funding via central bank operations — was reported to have increased significantly. Retail deposit funding was also reported to have increased (Chart 1). Lenders expected total funding volumes to remain unchanged in the three months to end-February 2019 (Q1), although ‘other’ funding was expected to increase significantly.
  • Spreads — relative to appropriate reference rates — on ‘other’ funding were reported to have increased significantly in Q4, while spreads on retail deposits were reported to have increased only slightly (Chart 2). Lenders expected spreads on ‘other’ funding to increase significantly and retail deposits spreads to increase slightly over the next quarter.
  • Lenders reported that the supply of deposits from households remained unchanged in Q4, and was expected to decrease over the next quarter. The supply of deposits from private non-financial corporates was reported to have increased slightly, and was expected to increase slightly in Q1 (Chart 3).
  • The proportion of wholesale market funding accounted for by long-term instruments was reported to have increased significantly in Q4 and was expected to increase significantly again in Q1.
  • Investor demand for banks’ wholesale debt was reported to have decreased significantly in Q4 and was expected to decrease significantly again in Q1 (Chart 4).

Capital

  • The average cost of capital was reported to have increased significantly in Q4 and was expected to increase significantly
    again in Q1.
  • Lenders reported that their total capital levels decreased slightly in Q4, and was expected to remain unchanged 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 increased significantly in Q4 (Chart 5). This was reported to have been driven by a significant increase in wholesale funding spreads (Chart 6). Lenders expected a significant increase in the transfer price in Q1.

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