Well I think there are two potential pressures here:

One is a decline in "retail saving" due to concentration of wealth in the hands of those who don't do much "retail saving." Another aspect might also be the growth of alternative investment options for the middle class also.

Alternatively, all we know is that they don't have the deposits to back the loans they make. But that could be because they have worked hard to make many more loans than before?

I'll try to dig out some figures on "retail deposits."

That article by DataMonitor, calling itself the oxymoron ´business intelligence´, seems the most unfounded and unprofessional compilation of unrelated bits and pieces to reach a conclusion.

Unsourced, unsigned and undefined statements massaged to look like analysis.  It makes no sense and does not logically follow a reasonable thought process to its end.

It is not credible information to reach any decision.

_Our knowledge has surpassed our wisdom. --Charu Saxena._

If all the loans that Northern Rock has originated and then repackaged, securitised and shoved off the balance sheet and into the Granite SIV are brought back onto the balance sheet, what would be NR's loans-to-reserves ratio?

I bet it would be less than 1%.

We have met the enemy, and he is us — Pogo

Pardon my ignorance but what does the 'LQD' prefix stand for?

What you need to look at are the real figures, not the relative proportions of funds raised from wholesale and retail markets. The wholesale funding market has been growing in absolute terms over the past 20 years partly because of new investment vehicles that offer corporates a good combination of liquidity and growth potential on their excess cash. Whereas in the 1980's they'd keep the cash stashed away in different types of unflexible money markets, today they put them in various mid to long-term funds and draw on short-term credit (usually from the same financial institutions where they invested in the funds)... while using these funds as collateral.

As someone who had no faith in Bushco and refused to invest in the stock market much the last decade (oops bad call) I can tell you that ordinary time deposits don't offer squat return.  I've have been much better off buying speculative real estate (even without leverage).

You can't offer 1 year CD's at 3% when inflation is 3% and expect people who do save to rush right up to the window.  

People may seem irrational but they aren't when you look at them in aggregate.  If there is no return on saving, use the money instead.  That's the Greenspan legacy.