Banks As Patient Lenders: Evidence from a Tax Reform

54 Pages Posted: 24 May 2018 Last revised: 24 Jul 2020

See all articles by Elena Carletti

Elena Carletti

Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Filippo De Marco

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Vasso Ioannidou

Lancaster University - Management School; Centre for Economic Policy Research (CEPR)

Enrico Sette

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: July 23, 2020

Abstract

We provide new evidence on how deposit funding affects bank lending. For identification, we exploit a tax reform in Italy that induced households to substitute bank bonds with deposits. We find that banks with larger increases in deposits expand the supply of credit lines and long-term credit to low-risk firms. Additional evidence indicates that these results are consistent with theories emphasizing the demandable nature of the deposit contract rather than theories stressing the stability of deposit funding due to government guarantees. In this regard, we show that banks under stress face large runs on retail deposits, but not on retail bonds.

Keywords: banks, deposits, maturity, risk-taking, government guarantee

JEL Classification: G21, G28, G01

Suggested Citation

Carletti, Elena and De Marco, Filippo and Ioannidou, Vasso and Sette, Enrico, Banks As Patient Lenders: Evidence from a Tax Reform (July 23, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3179491 or http://dx.doi.org/10.2139/ssrn.3179491

Elena Carletti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Filippo De Marco (Contact Author)

Bocconi University - Department of Finance ( email )

Department of Finance
Via Roentgen 1
Milano, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Vasso Ioannidou

Lancaster University - Management School ( email )

Bailrigg
Lancaster, LA1 4YX
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Enrico Sette

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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