The interest expense that banks are paying for retail funds is now the lowest on record, according to research firm Market Rates Insight.
In 2011, banks paid an average of 16 cents in interest expense on deposits for every $1 they earned in interest on loans, MRI said. In 2007, prior to the last recession, banks paid an average of 51 cents in interest expense on deposits for every $1 they earned as interest on loans.
Total interest income from loans at FDIC-insured institutions in 2007 was $725 billion and total interest expense paid for deposits amounted to $372 billion, which is a cost of 51 cents in interest paid for every $1 of interest earned, according to MRI in San Anselmo, Calif.
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