Liabilities survey shows notable shifts within funding sources

The 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.

In the second quarter of 2023, lenders reported no significant change in total funding volumes. However, there were notable shifts within the funding sources. "Other" funding, which includes wholesale debt funding, wholesale deposits, and funding via central bank operations, increased, while retail deposit funding decreased. Looking ahead to the third quarter, lenders anticipated an increase in total funding volumes.

The cost of funding, relative to appropriate reference rates, slightly decreased for both "other" funding and retail deposits during Q2. However, lenders expected the costs for "other" funding to increase in the next quarter, while retail deposit costs were anticipated to remain unchanged.

Lenders reported a decrease in the supply of deposits from households and private non-financial corporations (PNFCs) in Q2, and this trend was expected to continue in the upcoming quarter.

In terms of wholesale market funding, lenders noted an increase in the proportion of long-term instruments in Q2. However, this proportion was expected to decrease in Q3.

Regarding investor demand, there was a decrease in UK investor demand for wholesale bank debt in Q2, accompanied by a slight decrease in demand from non-UK investors. However, lenders predicted an increase in demand from both UK and non-UK investors in Q3.