Retail funds cost increased 140 bps at CBA

Commonwealth Bank's submission to the Senate banking inquiry centres on funding themes and asks readers to think about "a structural shift in the way the banking sector is now funding itself."

Retail deposits increased to 59 per cent of CBA funding at October 2010, up from 53 per cent in October 2007.

CBA said that since June 2007 the bank's deposit funding costs - in the retail bank - increased by between 135 and 140 basis points outside of changes in the RBA cash rate.

This number of 140 may be malleable.

"The assessment of deposit funding costs reflects a variety of significant influences, including both headline and non-advertised 'special' rates, and temporary bonus or honeymoon rates.

"The cost increase also reflects a material change in customer preferences towards high-yield deposit accounts," CBA wrote.

Short-term wholesale funding, at 18 per cent, is a little more than the sector average.

Prior to the GFC, CBA added a premium of around 10 basis points to the RBA cash rate for short-term funding.

This soared to 90 basis points at the height of the GFC and has now settled at 20 basis points, or twice the spread.

Long-term funding is up to 23 per cent from 18 per cent.

The bank was less explicit on the rise in funding on long-term debt, but cited the example of five-year funds where the spread is 100 basis points more now when seeking funds from domestic investors and up to 120 bps more when borrowing offshore.