Bank Funding Costs for International Banks
IMF Working Papers, April 30, 2014
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Bibliographic details
- Authors: Rita Babihuga, Marco Spaltro
- Published: April 30, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475517910.001
Sample and scope
- Sample period: 2001–12.
- Focus: determinants of banks’ unsecured funding costs for a sample of internationally active banks.
Determinants of funding costs
- Bank-specific characteristics associated with changes in unsecured funding costs:
- an institution’s credit worthiness.
- the return on its market value.
- the level and quality of capital.
- Market factors associated with funding costs:
- the level of investor risk appetite.
- shocks to financial markets, notably the US subprime crisis and the Euro Area sovereign debt crisis.
Crisis effects and dynamics
- The US subprime crisis and the Euro Area sovereign debt crisis were key drivers of the sharp rise in bank funding costs.
- Large systemically important institutions enjoyed a funding advantage, and this advantage increased since the onset of the two crises.
Evolution by end-2012
- With the exception of Euro Area periphery banks, by end-2012 the rise in funding costs had generally been reversed for most major banks.
- Reversal drivers:
- improvements in bank asset quality.
- steps taken to increase resilience, notably higher capitalization.
Policy implications and recommendations
- Results suggest increased capital buffers may potentially support bank lending to the real economy by reducing bank funding costs.
Key publication identifiers (from source)
- Pages: 38
- Volume: 2014
- Issue: 071
- Series: Working Paper No. 2014/071
- DOI: https://doi.org/10.5089/9781475517910.001
Source: IMF Working Paper No. 2014/071 — Bank Funding Costs for International Banks.