Abstract

http://ssrn.com/abstract=2018474
 
 

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Deposit Rate Advantages at the Largest Banks


Stefan Jacewitz


FDIC, Division of Insurance and Research

Jonathan Pogach


FDIC, Division of Insurance and Research

February 21, 2014


Abstract:     
We estimate differences in funding costs between the largest banks and the rest of the industry. Using deposit rates offered at the branch level, we eliminate many non-risk-related differences between banks. We document significant and persistent pricing advantages at the largest banks for comparable deposit products and deposit risk premiums. Between 2007 and 2008, the risk premium paid by the largest banks was 39 bps lower than the risk premium at other banks under the baseline estimate after controlling for common risk variables. These findings are consistent with an economically significant too-big-to-fail subsidy paid to the largest banks through lower risk premiums on uninsured deposits.

Number of Pages in PDF File: 43

Keywords: Too big to fail; Risk premium; Deposits; Interest rates

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Date posted: March 9, 2012 ; Last revised: March 8, 2014

Suggested Citation

Jacewitz, Stefan and Pogach, Jonathan, Deposit Rate Advantages at the Largest Banks (February 21, 2014). Available at SSRN: http://ssrn.com/abstract=2018474 or http://dx.doi.org/10.2139/ssrn.2018474

Contact Information

Stefan Jacewitz (Contact Author)
FDIC, Division of Insurance and Research ( email )
550 17th Street NW
Washington, DC 20429
United States
Jonathan Pogach
FDIC, Division of Insurance and Research ( email )
550 17th Street NW
Washington, DC 20429
United States
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