Do Banks Worry about Attentive Depositors? Evidence from Multiple-Brand Banks*

Matthieu Chavaz and Pablo Slutzky

Review of Finance, 2024, vol. 28, issue 1, 353-388

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 (search for similar items in EconPapers)
JEL-codes: D81 G01 G21 G28 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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