Monetary policy transmission through cross-selling banks

Christoph Basten and Ragnar Juelsrud

Research Bulletin, 2025, vol. 136

Abstract: Banks trade off short-term losses on deposits against long-term profits from cross-selling other products to new depositors. This strategy is especially attractive when policy rates are low and future sales are more valuable. Therefore, deposit rates move less than policy rates: banks keep them relatively higher when policy rates fall, and relatively lower when policy rates rise. As returns on other financial assets follow policy rates more closely, this makes deposits relatively less attractive for depositors at higher policy rates. Therefore, policy rate hikes lead to a reduction in deposits, which are the key source of refinancing for bank loans. This cuts loan supply, supporting the transmission of monetary policy. JEL Classification: D14, D43, E52, G21, G51

Keywords: bank franchise; cross-selling; deposits channel of monetary policy; monetary policy transmission; multi-product banking (search for similar items in EconPapers)
Date: 2025-11
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