How can banks effectively stabilize their retail customers saving behavior? The impact of contractual rewards on saving persistence and cash flow volatility

Tobias Schlüter, Sönke Sievers and Thomas Hartmann-Wendels

VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association

Abstract: We examine the saving behavior of banks retail customers. Our unique dataset comprises the contract and cash flow information for approximately 2.2 million individual contracts from 1991 to 2010. We find that contractual rewards, i.e., qualified interest payments, and government subsidies, effectively stabilize saving behavior. The probability of an early contract termination decreases by approximately 40%, and cash flow volatility drops by about 25%. Our findings provide important insights for the newly proposed bank liquidity regulations (Basel III) regarding the stability of deposits and the minimum requirements for risk management (European Commission DIRECTIVE 2006/48/EC; in Germany, translated into the MaRisk). Finally, the results inform bank managers how the price setting via deposit interests influences their funding.

JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ban and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc12:62057

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