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8.1 This chapter covers market-based FSIs required for assessing the health of the
financial system. The chapter is divided into two sections: interest rate and securities market
indicators. The interest rate FSIs provide information on the interest rates charged by and to
deposit-takers, thus providing an indication of profitability and competitiveness in the
banking sector, along with information on the spread in interbank rates that can provide early
indications of credit risk concerns among deposit-takers. The securities market FSIs provide
information on the liquidity of the securities markets in which deposit-takers are active and
on which they can partially rely to help manage their liquidity.
8.2 To support the monitoring of the financial health and soundness of deposit-takers, the
Guide encourages the compilation of the following two interest-rate-based FSIs: (1) the
spread between reference lending and deposit rates (SLDR); and (2) and the spread between
the highest and lowest interbank rates (SIR).
8.3 Spreads between lending and deposit rates can serve as indicators of trends in
deposit-takers’ net interest income, and hence of profitability. The interest-rate spread can
also provide information on deposit-takers’ pricing behavior. However, further information
would be required to understand the causes of behavior: for instance, wide spreads may arise
from high risk due to underdeveloped collateral systems or weak protection by the judicial
system, while widening spreads over time might reflect increased risk premia rather than a
lessening of competitive pressures.
8.4 Interest-rate spreads, such as those between borrowers with different credit risk
profiles, can serve to indicate the level of perceived risk within the financial system.
Therefore, the spread between the highest and lowest interbank rates would help to capture
banks’ own perception of problems and ri