Developments in debt issuance costs of South African banks

" This paper describes bank debt issuances in South Africa and estimates the cost of these issuances, at both aggregate and individual bank levels. Issuance costs are an important indicator of conditions in debt markets and can be used to assess the impact of regulations on bank funding costs. Since debt issuance makes up about a quarter of marginal bank funding (i.e. funding for new loans) issuance costs are also useful for assessment of the transmission of funding conditions to lending rates. We show that debt issuance costs have risen meaningfully since the global financial crisis. However, the increase is less than has been the case for other forms of funding (such as long-term retail and wholesale deposits). We show banks have increased the average tenor of debt issuances, which has tended to raise the cost of issuance because rates have been higher on longer maturity issuances than on short maturity issuances. "