Bank of England: Latest Interest Rate Report July 2023



The net interest margins of the UK banks continue to climb almost in step with the base rate increases.

The net interest margin is a good indicator for many businesses of the hidden cost of doing business with a bank.

The ballooning net interest margins are behind record bank profits which are dominating the headlines. The challenge is that most of the additional costs to businesses are hidden in the ‘net interest margin’ of their banks.

The effective cost of banking for UK businesses has risen sharply since last year without justification.

The widening of net interest margins has caused furore in political circles around Europe particularly in Italy and Spain where its Governments are looking at windfall levies on the banks. Other governments including Ireland have considered imposing penalties on banks for not fairly passing on the benefit of higher base rates to customers.

Many businesses have legacy banking arrangements that don’t allow them to benefit from interest rate increases. This is often because the low-interest rate environment that prevailed since the global financial crisis presented no compelling reason to modernise their banking arrangements. There was little benefit in changing their banking structure as it didn’t impact their profitability.

There is now a compelling opportunity for businesses to improve their revenues by optimising their banking structure to benefit fully from higher interest rates.

The latest statistical release from the Bank of England published in August 2023 shows a slow improvement in the UK banks deposit rates for businesses but this improvement continues to lag the increases in the base rate.

Benchmarks also confirm that the return on company and institutional funds in UK banks is not optimised for most businesses. Much of this is down to banking arrangements that are no longer fit for purpose, a legacy of the long period of low market interest rates.

Working with many UK companies, the Bankhawk experience is that companies can easily improve profitability without having to make significant changes to their banking relationships.

CFO’s and corporate treasurers are working with Bankhawk to effect improvements to the structure and configuration of the banking arrangements using benchmarking and deep banking expertise.



PNFCs deposits and loans


A PNFC is a private non-financial corporation.


Effective interest rates for: PNFC’s on stock outstanding of deposits and loans


Outstanding facilities


1. The effective rate for sight deposits increased by 0.25 % from 1.92% in May to 2.17% in June.

2. The effective rate for time deposits increased by 0.16% from 3.72 % in May to 3.88% in June.

3. The effective rate for loans increased by 0.28% from 6.04% in May to 6.32% in June.



Effective interest rates for: PNFC’s on new deposits and loans


New business


1. The effective rate for time deposits increased by 0.3% from 3.94% in May to 4.24% in June.

2. The effective rate for loans increased by 0.04% from 6.32% in May to 6.36% in June.



Table: Effective Interest Rates paid/received on PNFC balances by UK MFI’s (excluding Central Bank)

Per cent – Not seasonally adjusted


Source: Bank of England – Statistics – Published on 29 July 2023


Click here to read more interesting blogs by Bankhawk

Register for more information and regular updates here