Refinancing is an important aspect for banks to meet their lending activities.
Banks must constantly refinance themselves in order to meet their obligations to their customers. Refinancing can take place through various channels, such as savings deposits, interbank lending, issued bonds or equity.
Savings deposits are an important form of refinancing for banks. They are a reliable and stable source of funds, as customers usually leave their money with the bank for a longer period of time. Interbank lending is another important source of funding. Banks lend money to each other and use the liquidity that they cannot cover with their customers' deposits.
Issued bonds are also an important form of refinancing. Banks can place bonds on the capital markets to raise short-term or long-term funds. Refinancing through bonds has the advantage that interest rates are often lower than other forms of refinancing.
Finally, equity can also be a source of refinancing for banks. When banks raise new equity, they can use it to increase their lending activities. However, this form of refinancing has the disadvantage that it is often more expensive than other forms of refinancing and banks also have to give up more control to shareholders in return.
