Banks as Patient Lenders: Evidence from a Tax Reform

55 Pages Posted: 13 May 2019

See all articles by Elena Carletti

Elena Carletti

Bocconi University

Filippo De Marco

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

Vasso Ioannidou

Centre for Economic Policy Research (CEPR); The Business School (formerly Cass)

Enrico Sette

Bank of Italy

Date Written: May 2019

Abstract

We study how a greater reliance on deposits affects bank lending policies. For identification, we exploit a tax reform in Italy that induced households to substitute bank bonds with deposits. We show that the reform led to larger increases (decreases) in term deposits (bonds) in areas where households held more bonds before the reform. We then find that banks with larger increases in deposits did not change their overall credit supply, but increased credit-lines and the maturity of term-loans. These results are consistent with key theories on the role of deposits as a discipline device and of banks as liquidity providers.

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

JEL Classification: G01, G21, G28

Suggested Citation

Carletti, Elena and De Marco, Filippo and Ioannidou, Vasso and Ioannidou, Vasso and Sette, Enrico, Banks as Patient Lenders: Evidence from a Tax Reform (May 2019). CEPR Discussion Paper No. DP13722, Available at SSRN: https://ssrn.com/abstract=3387311

Elena Carletti (Contact Author)

Bocconi University ( email )

Filippo De Marco

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

CEPR Financial Economics ( email )

London
United Kingdom

Vasso Ioannidou

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

The Business School (formerly Cass) ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Enrico Sette

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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