On 13 April 2016, the Bank of England published the results of its Bank Liabilities Survey for 2016 Q1.
The aim of this quarterly survey of banks and building society lenders is to improve the understanding of the role of lenders' liabilities and capital in driving credit and monetary conditions. The survey covers: 1) developments in the volume and price of bank funding; 2) developments in the loss-absorbing capacity of banks as determined by their capital positions; and 3) developments in the internal price charged to business units within individual banks to fund the flow of new loans.
In particular the survey found:
- Funding: UK banks and building societies reported that their total funding volumes had increased significantly in the three months to mid-March 2016. In addition, investor demand for wholesale debt fell significantly in 2016 Q1 for the first time since the survey began in 2012 Q4.
- Capital: Lenders reported that their total capital levels decreased in 2016 Q1, having increased in most quarters since the survey began. Capital levels are expected to remain unchanged in Q2. Lenders also reported that their average cost of capital increased significantly in 2016 Q1, but is expected to decrease in Q2.
- Transfer pricing: Lenders reported that the internal price charged to business units to fund the flow of new loans (the 'transfer price') increased in 2016 Q1, driven by significantly higher long-term wholesale funding spreads. Lenders reported that swaps or other reference rates had pushed 'transfer prices' downwards significantly.