Abstract / Description of output
Purpose
This paper aims to present an analysis of the UK bank loans and deposits in tandem, linking the loan-to-deposit (LTD) ratio to macroprudential policy and funding restrictions. LTD ratio is used by micro and macroprudential authorities to address both structural (long-term) and cyclical (short-term) liquidity risks. It is an outcome of several political and economic factors and should be evaluated against this background.
Design/methodology/approach
The authors use trend analysis and panel regression to investigate LTD ratio of Major British Banking Groups from 1945 to 2012 in the midst of changing the UK Government policies.
Findings
The results show that wholesale funding, government intervention and repression were the major forces behind LTD trends.
Originality/value
The authors recommend the use of LTD as a complement to other liquidity ratios in micro and macro-prudential regulation, particularly in the context of current reforms to banking capital requirements.
This paper aims to present an analysis of the UK bank loans and deposits in tandem, linking the loan-to-deposit (LTD) ratio to macroprudential policy and funding restrictions. LTD ratio is used by micro and macroprudential authorities to address both structural (long-term) and cyclical (short-term) liquidity risks. It is an outcome of several political and economic factors and should be evaluated against this background.
Design/methodology/approach
The authors use trend analysis and panel regression to investigate LTD ratio of Major British Banking Groups from 1945 to 2012 in the midst of changing the UK Government policies.
Findings
The results show that wholesale funding, government intervention and repression were the major forces behind LTD trends.
Originality/value
The authors recommend the use of LTD as a complement to other liquidity ratios in micro and macro-prudential regulation, particularly in the context of current reforms to banking capital requirements.
| Original language | English |
|---|---|
| Pages (from-to) | 353-370 |
| Number of pages | 18 |
| Journal | Journal of Financial Regulation and Compliance |
| Volume | 30 |
| Early online date | 18 Mar 2022 |
| DOIs | |
| Publication status | Published - 27 May 2022 |
Keywords / Materials (for Non-textual outputs)
- regression analysis
- financial stability
- monetary policy
- loan to deposit
- loan-to-deposit ratio
- g01
- g18
- g210
- g280
- g230
- e520