Bank Funding Cost Indicators

Jondeau_Mojon_Sahuc_2020 construct a new indicator based on interbank data, called forward funding spread, to monitor in real time bank funding risk. It is calculated as the difference between the 3-month forward rate of the yield curve constructed using only instruments with a 3-month tenor and the corresponding forward rate of the overnight interest swap yield curve, which is assumed to be free of default risk.

It is found to have a much higher predictive power for economic growth and bank lending in the United States and the euro area, compared with measures such as spot IBOR-OIS, credit default swap spreads or bank bond credit spreads.

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