Liabilities

Banks’ liabilities consist of deposits, bill acceptances, other borrowings and other liabilities.  Banks’ liabilities also include their short-term and long-term wholesale funding liabilities, both domestic and wholesale (see the section Bank Funding for more detail on this aspect of banks’ liabilities).

Note that liabilities are one side of the balance sheet of banks, the other is assets.  Readers should refer to the section on Assets for more information.

Summary

At the end of April 2011, total liabilities of Australian banks were valued at $2.57 trillion, of which $1.92 trillion were resident liabilities (i.e. liabilities on the books of banks with any individual, business or organization domiciled in Australia), $493 billion were non-resident liabilities (i.e. liabilities on the books of banks with any individual, business or organization domiciled overseas) and $124 billion was the amount due from overseas operations of banks.
 

Banks – growth in liabilities and the global financial crisis

Over the 10 years prior to the start of the global financial crisis (August 1997 – August 2007), the average annual growth rate for banks’ resident liabilities was 13%.  During the 12 months after this, it reached as high as 32% (i.e. over the 12 months to the end of February 2008).  In particular, deposits grew at record levels in late 2007/early 2008.

Deposits

At the end of April 2011, total deposits of banks was $1.5 trillion.  This includes household deposits, business deposits and other deposits.  Growth in deposits reached record levels, as high as 35% over the 12 months to the end of January 2008.   Over the 1990s, growth in deposits averaged 9% per annum.   

The very high growth rates for deposits from August 2007 were a result of a combination of factors.  Over this period:

• households were shifting their asset mix away from equities and housing to bank deposits, particularly in response to large falls in the equities market. 

• as the cost of bank funding increased, bank competition for deposit funding was strong. As such, interest rates on deposits were attractive (especially at a time when other assets such as equities and housing were not performing well).

• large falls in housing interest rates over late 2008, as well as the fiscal stimulus, assisted in keeping the level of deposits high.

Retail deposits

The definition of deposits used above is very broad, more commonly, the concept used is ‘retail deposits’.  These are deposits received from households and businesses (i.e. non-financial corporations).   

At the end of April 2011, a total of $856 billion of deposits was held at ABA member banks from households and businesses.  Households made up $497 billion (58%) of these deposits and businesses made up $359 billion (42%).     

For businesses, growth rates for deposits peaked in the second half of 2007.  Over the past year to the end of April 2011, the annual growth for deposits from businesses was 13.3%. 

The ABS Financial Accounts provide considerable detail on banks liabilities which is broadly summarized in the table below.