LONDON (Reuters) - For the first time in almost a year British banks do not expect to cut the rates they pay to savers over the next three months, a Bank of England survey showed on Thursday.
Banks said the difference between the interest rates paid on retail deposits and 'reference' interest rates had narrowed sharply between late 2012 and the three months to August, but was now expected to hold steady over the coming three months.
Overall funding costs for British banks have fallen sharply since last year, helped by reduced tensions in the euro zone and the BoE's Funding for Lending Scheme, which offers banks cheap finance if banks maintain or increase lending levels.
This has reduced banks' need to attract savings from retail customers, meaning they now offer lower interest rates than before. The BoE's official interest rate has been at a record-low 0.5 percent for more than four years.
Lenders said they planned to raise a significant amount of capital in the remainder of 2013, partly in response to pressures from regulators such as the BoE, which wants banks to build bigger buffers against future losses.
The quarterly BoE survey was conducted between August 13 and September 4.
* To read the BoE's full Q3 2013 Bank Liabilities Survey, click here: http://www.bankofengland.co.uk/publications/Documents/other/monetary/bls/bls13q3.pdf
(Reporting by David Milliken; Editing by Christina Fincher)