What is the Loan:Deposit Ratio?

What is the Loan:Deposit Ratio?

Join Tim as he explains the advantages and disadvantages of the Loan:Deposit ratio. He explores how the ratio is calculated, used and also some of the limitations of using it.
Overview

The loan: deposit ratio compares the size of a bank’s loan book to its deposits to analyse the bank’s funding strategy. Funding can come from customer deposits or the wholesale markets. This measure is not without inconsistencies however, as it is not always a perfect measure.

Key learning objectives:

  • The question the loan: deposit ratio is asking

  • The differences and implications of how banks fund their loans

  • Potential issues with the loan: deposit ratio

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