Do banks respond to their friends’ markets? Social spillovers in deposit pricing

Sofia Anyfantaki, Natalya Martynova and Panagiotis Avramidis

No 3178, Working Paper Series from European Central Bank

Abstract: We study how deposit rate shocks transmit across banking markets through digital social ties. Depositors’ inattention implies that households react to outside rate changes only when social networks make these changes salient, inducing connected banks to raise their own rates. Using merger-driven shocks to local deposit rates and county-level social connectedness, we show that small banks increase rates in response to shocks occurring in socially linked but geographically distant counties. Spillovers are economically meaningful, persistent, and stronger in competitive markets and in counties with more financially sophisticated households. Digital social ties therefore activate depositor search and integrate deposit markets across space. JEL Classification: G20, G21, G23, G29

Keywords: deposit pricing; information transmission; limited attention; social connections; uniform pricing (search for similar items in EconPapers)
Date: 2026-01
New Economics Papers: this item is included in nep-inv, nep-net and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263178

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