Bank Liabilities Survey - 2019 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 17 October 2019

Overview

Developments in lenders’ balance sheets are of key interest to the Bank of England in its assessment of economic conditions. Changes in the price, quantity and composition of lenders’ funding may affect their willingness or ability to lend, and the price of lending. The aim of this quarterly survey of banks and building society lenders is to improve understanding of the role of lenders’ liabilities and capital in driving credit and monetary conditions. Lenders are asked about the past three months and the coming three months. The survey covers developments in the volume and price of bank funding; developments in the loss-absorbing capacity of banks as determined by their capital positions; and developments in the internal price charged to business units within individual banks to fund the flow of new loans, sometimes referred to as the ‘transfer price’.

This report presents the results of the 2019 Q3 survey. It was conducted between 2 and 20 September 2019. Copies of the questionnaires are available under ‘Related Documents’. Find out how to interpret this survey.

Additional background information on the survey can be found in the 2013 Q1 Quarterly Bulletin article ‘The Bank of England Bank Liabilities Survey’.

The 2019 Q4 Bank Liabilities Survey will be published on 16 January 2020.

Funding

  • UK banks and building societies reported that their total funding volumes increased in the three months to end-August 2019 (Q3). Within the total, both ‘other’ funding – which includes wholesale debt funding, wholesale deposits and funding via central bank operations – and retail deposit funding, were reported to have increased (Chart 1). Lenders expected total funding volumes to decrease slightly in the three months to end-November 2019 (Q4).
  • Spreads – relative to appropriate reference rates – on ‘other’ funding were reported to have increased slightly in Q3, while spreads on retail deposits were reported to have decreased (Chart 2). Lenders expected spreads on ‘other’ funding to increase, however retail deposit spreads were expected to remain unchanged over the next quarter.
  • Lenders reported that the supply of deposits from households increased in Q3, and was expected to increase over the next quarter. The supply of deposits from private non-financial corporates was reported to have increased in Q3, and was expected to increase in Q4 (Chart 3).
  • The proportion of wholesale market funding accounted for by long-term instruments was reported to have decreased in Q3 but was expected to increase in Q4.
  • Investor demand for banks’ wholesale debt increased in Q3 (Chart 4). Lenders expected a decrease in the demand for wholesale debt in Q4.

Chart 1 Funding volumes(a)(b)

(a) Net percentage balances are calculated by weighting together the responses of those lenders who answered the question. The blue bars show the responses over the previous three months. The red diamonds show the expectations over the next three months. Expectations balances have been moved forward one quarter so that they can be compared with the actual outturns in the following quarter.
(b) Question: ‘How have funding volumes changed?’.
(c) A positive balance indicates an increase in funding volumes.

Chart 2 Funding spreads(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has the average cost of funding changed?’.
(c) A positive balance indicates an increase in funding spreads relative to appropriate reference rates.

Chart 3 Supply of deposits(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has the supply of deposits from the following sources changed?’.
(c) A positive balance indicates an increase in the supply of deposits.

Chart 4 Investors demand for UK bank debt(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has the demand for wholesale debt from the following investors changed?’.
(c) A positive balance indicates an increase in investors’ demand for banks’ wholesale debt.

Capital

  • The average cost of capital was reported to have remained unchanged in Q3 and was expected to increase slightly in Q4.
  • Lenders reported that their total capital levels increased in Q3, and were expected to increase in Q4 (Chart 5).

Chart 5 Total capital levels(a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘Has your total capital changed over the past three months? What are your plans for the next three months?’.
(c) A positive balance indicates an increase in total capital.

Transfer pricing

  • Lenders reported that the internal price charged to business units to fund the flow of new loans (the ‘transfer’ price) remained the same in Q3 (Chart 6). Lenders expected no change in the transfer price in Q4.

Chart 6 Transfer prices (a)(b)

(a) See footnote (a) to Chart 1.
(b) Question: ‘How has the marginal absolute cost of providing funds to business units changed (sometimes referred to as the 'transfer price')?’.
(c) A positive balance indicates an increase in transfer prices.

How to interpret this survey

The results are based on lenders’ own responses to the survey. They do not necessarily reflect the Bank’s views on developments in bank liabilities. To calculate aggregate results, each lender is assigned a score based on their response. Lenders who report that conditions have changed ‘a lot’ are assigned twice the score of those who report that conditions have changed ‘a little’. These scores are then weighted by lenders’ market shares. The results are analysed by calculating ‘net percentage balances’ — the difference between the weighted balance of lenders reporting that, for example, demand was higher/lower or terms and conditions were tighter/looser. The net percentage balances are scaled to lie between ±100.

In this report, changes in balances are described as ‘significant’ if greater than 10 in absolute terms, as ‘slight’ if between 5 and 10 and as ‘unchanged’ if less than 5.

Annexes

  1. The options specified in the survey vary by question, although respondents have the option to include additional comments where relevant.

Next publication date: 16 January 2020.

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