What is the Loan:Deposit Ratio?

What is the Loan:Deposit Ratio?

Tim Skeet

35 years: Debt capital markets

In this video, Tim explains the advantages and disadvantages of the loan-to-deposit ratio. He also explores how the ratio is calculated and used, as well as some of the limitations of using it.

In this video, Tim explains the advantages and disadvantages of the loan-to-deposit ratio. He also explores how the ratio is calculated and used, as well as some of the limitations of using it.

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What is the Loan:Deposit Ratio?

13 mins 10 secs

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:

  • Outline the question that the loan: deposit ratio is asking

  • Understand the differences and implications of how banks fund their loans

  • Comprehend the potential issues with the loan: deposit ratio

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Summary
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