Friday, May 4

Access to the foreign bucks

Recently I posted on the deposits held with banks using the data from table D3 on the RBA website.

This was cross posted to Macrobusiness, where Deep T made the following comment.
The last graph is not exactly correct as it does not include deposits by offshore lenders. Please see RBA stats B12.2
I thought fair enough. This is something I need to look into. So I shot a quick email to the RBA.
Dear Sir/Madam

Table D03 lists various forms of deposits with banks.

Table B12.2 lists the foreign liabilities held by banks

My question is whether the figures from the two tables are fully mutually exclusive, or whether the deposits in D03 include (some or all) of the foreign deposits in table B12.2

Thanks in advance.

With impressive alacrity for a government agency, I now have a response from the RBA ...
Dear Mark

Thank you for your email.

The deposits data in Statistical Table D03 relate to deposits held at Australian-located banks on behalf of residents in all currencies.

The deposits data in Statistical Table B12.2 relate to the International Banking Statistics. In this table, deposits comprises all claims reflecting evidence of deposit – including non-negotiable certificates of deposit – that are not represented by negotiable securities. The data relate to Australian-located banks’ positions with non-residents in all currencies and positions with residents in foreign currency only.


 So I need to add table B12.2 to my list of charts ... here it is.

The thing I find interesting about this chart and the last chart from my previous post is that they both tell a consistent story. While Australian funds on term deposits with he banks have gone through the roof, foreign deposits with banks (above), and foreign borrowings by banks (below) have pretty much flat-lined since the GFC.

The question I am left pondering is whether lower interest rates will result in an increased money supply. Is there a structural blockage in terms of Australian banks attracting overseas funds? And will lower interest rates see some Australian money move elsewhere for higher returns (equities perhaps)? In short, could monetary policy be broken?

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