Bank of England: June Interest Rates Report Commentary
The June statistical release from the Bank of England shows an improvement in the UK banks deposit rates for businesses but this improvement continues to lag the increases in the base rate.
Benchmarks also confirm that the return on company and institutional funds in UK banks is not optimised for most businesses. Much of this is down to sub-optimised banking arrangements, a legacy of the long period of low market interest rates.
It is notable that the UK banks are starting to ‘pay up’ for time deposits showing that this part of the market has become more competitive with the high street banks more active in the market. The effective rate for existing time deposits increased by 0.21% from 3.51% in April to 3.72 % in May.
The delays by banks not passing on market interest rate increases to businesses means the UK banks are profiting at the expense of their business customers.
Working with many UK companies, the Bankhawk experience is that companies can easily improve profitability without having to make significant changes to their banking relationships.
CFO’s and corporate treasurers are working with Bankhawk to effect improvements to the structure and configuration of the banking arrangements using benchmarking and deep banking expertise.
PNFCs deposits and loans
A PNFC is a private non-financial corporation.
Effective interest rates for: PNFC’s on stock outstanding of deposits and loans
Outstanding facilities
1. The effective rate for sight deposits increased by 0.02 % from 1.90% in April to 1.92% in May.
2. The effective rate for time deposits increased by 0.21% from 3.51% in April to 3.72 % in May.
3. The effective rate for loans increased by 0.15% from 5.89% in April to 6.04% in May.
Effective interest rates for: PNFC’s on new deposits and loans
New business
1. The effective rate for time deposits increased by 0.24% from 3.70% in April to 3.94% in May.
2. The effective rate for loans increased by 0.33% from 5.99% in April to 6.32% in May.
Table: Effective Interest Rates paid/received on PNFC balances by UK MFI’s (excluding Central Bank)
Per cent – Not seasonally adjusted
Source: Bank of England – Statistics – Published on 29 June 2023
