Do Banks Worry About Attentive Depositors? Evidence from Multiple-Brand Banks

58 Pages Posted: 13 Jul 2020 Last revised: 28 May 2024

See all articles by Matthieu Chavaz

Matthieu Chavaz

Independent

Pablo Slutzky

University of Maryland - Robert H. Smith School of Business

Date Written: March 27, 2023

Abstract

Panic-based (non-fundamental) spikes in depositors' attention can be a source of bank fragility in theory, but separating such spikes from underlying fundamentals is challenging empirically. Using online search data, we show that during the Global Financial Crisis, UK banks facing surges in attention respond by increasing retail deposit rates, but only for instant withdrawal deposits. Exploiting variation across brands owned by the same bank (and thus sharing the same fundamentals), we find that banks respond even when surges are not justified by fundamentals. In addition, comparing onshore and offshore deposits by the same brand, we show that bank response is substantially stronger when the lack of deposit insurance and a larger presence of wholesale depositors magnifies potential losses to depositors.

Keywords: Banks, information acquisition, deposit insurance, banking crises.

JEL Classification: D81, G01, G21, G28

Suggested Citation

Chavaz, Matthieu and Slutzky, Pablo, Do Banks Worry About Attentive Depositors? Evidence from Multiple-Brand Banks (March 27, 2023). Available at SSRN: https://ssrn.com/abstract=3631051 or http://dx.doi.org/10.2139/ssrn.3631051

Matthieu Chavaz

Independent ( email )

Pablo Slutzky (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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