Sir, in relation to the article about banks seeking to cut their reliance on wholesale funding and reduce their loan-to-deposit ratio (June 19), it is clear that stagnation in the inter-bank lending space continues despite speculation of green shoots in the economy and early recovery from the recession. Indeed, Bank of England Governor Mervyn King has highlighted time and time again in recent months how liquidity remains difficult to come by in the money markets.
With these problems unresolved, banks are right to seek more stable and widely spread finance. However, while retail deposits are the obvious answer, how do banks attract these monies when current rates do not appeal to savers and banks are not in a position to offer more competitive rates due to the higher cost of wholesale funding? This is a dilemma that many banks are faced with in the current climate. Encouragingly, the growing usage of the online banking channel means that it is now financially viable for banks to set up low cost internet savings banks. As customers are self-directed, banks can minimise overheads and pass on considerable incentives such as more appealing rates to gain increased access to deposits.
Marc De Groote
CEO, Callataÿ & Wouters