Deposit-loan gap

Among other variables, the Significant Bank Database contains a variable measuring a bank’s structural liquidity risk. This variable is calculated as the difference between a bank’s customer loans and customer deposits. Thus, a positive value indicates that the bank has more customer deposits than customer loans. This difference is measured relative to total assets. For clarity, the ratio is expressed as a percentage. This interesting and informative variable has attracted surprisingly little research attention. The only study using this variable that we are aware of is that of Patel, Sorokina, and Thornton Jr. (2022).

The figure shows the annual means for this variable over the 2009–2022 period. The figure illustrates that the deposit-loan shortfall in Western European and euro area banks has, on average, developed in a healthier direction over the 2009–2022 period. At least partially, one could assume that the net stable funding ratio has contributed to this development because it requires banks to correct the maturity mismatches on their balance sheets.

The orange line depicts the deposit-loan gap for the Swiss problem bank Credit Suisse. Its deposit-loan gap is much above the sample mean for most of the 2009–2022 period. However, at the end of this period, Credit Suisse’s ratio dives steeply. This is likely caused by the simultaneous deposit run and capital injection. Since the sample period ends in December 2022, Credit Suisse collapsed just a few months after the end of the sample period.

References

Patel, A., Sorokina, N., & Thornton Jr, J. H. (2022). Liquidity and bank capital structure. Journal of Financial Stability, 62, 101038.

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