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Developments in Banks' Funding Costs and Lending Rates

Author

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  • Belinda Cheung

Abstract

This article updates previous Reserve Bank research on the ways in which developments in the composition and pricing of banks’ debt funding have affected their overall cost of funds and influenced lending rates. Major banks’ outstanding funding costs and lending rates declined in 2016, following two reductions in the cash rate. However, lending rates and funding costs did not decline by as much as the cash rate. This was largely due to an increase in the cost of deposit funding, which reflected competition between financial institutions for deposits.

Suggested Citation

  • Belinda Cheung, 2017. "Developments in Banks' Funding Costs and Lending Rates," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 45-50, March.
    • Handle: RePEc:rba:rbabul:mar2017-05
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    File URL: https://www.rba.gov.au/publications/bulletin/2017/mar/pdf/bu-0317-5-developments-in-banks-funding-costs-and-lending-rates.pdf
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    Cited by:

    1. Tim Atkin & Gianni La Cava, 2017. "The Transmission of Monetary Policy: How Does It Work?," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 01-08, September.
    2. Laura Berger-Thomson & Blair Chapman, 2017. "Foreign Currency Exposure and Hedging in Australia," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 67-76, December.

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