Optimising retail deposit pricing

Banks are holding more retail deposits and also paying more for them – a recipe for reduced funding risk but also reduced profitability. Wei Ke, Ben Snowman, Ada Pham and Jens Baumgarten argue banks can mitigate the latter effect by analysing customer segments more closely


In September 2007, Northern Rock became one of the first banking industry victims of the credit crisis – forced to obtain liquidity support from the Bank of England after the wholesale markets it had been relying on seized up. Other banks fell into the same trap, and funding pressures have continued to be an issue for the banking industry throughout the past five years. The lessons are being learned by both banks and regulators.

The Basel III reforms, finalised in December 2010, include two new

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