A RESEARCH carried out by one of the major banks operating in Fiji has confirmed that a smaller liquidity pool has pushed up banks’ cost of funds, recommending that banks needed to carry sufficient liquidity to fund loan demand and to meet internal liquidity ratios, so they are aggressively competing for a shrinking pool of liquidity.
It said this had pushed deposit rates higher with aggregate time deposit rates edging up.
According to the report the liquidity of Fiji’s banking system reflects the ebbs and flows of economic activity, both domestically and in relation to the rest of the world.
It said while falling, it was certainly not at crisis levels – in fact, it was far from that, as aggregate wholesale deposit rates have only edged a little higher, on average.
“Should we get to levels that inhibit growth, threaten the solvency of financial institutions or impact on financial stability, then the Reserve Bank of Fiji (RBF) will inject more liquidity. It has the tools to execute that,” it said.
