Deposit Competition Beyond Rates
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SeriesErasmus Finance Seminars
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Speaker(s)Matteo Benetton (University of California at Berkeley, United States)
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FieldFinance, Accounting and Finance
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LocationErasmus University Rotterdam, Campus Woudestein, Van der Goot M1-16 (Heidelberg)
Rotterdam -
Date and time
September 30, 2025
11:45 - 13:00
Abstract
We study competition and pass-through in the market for retail deposits. Federal funds rate increases are associated with only minimal increases in deposit rates. Leveraging new data on offers mailed by banks to households, we show that federal funds rate increases are strongly associated with changes in mail volumes, sign-up bonuses, and offers targeting new customers. These margins and not interest rates are the primary ways in which interest rate changes affect the deposit market. We rationalize the use of these margins and not interest rates in a simple model with active and sleepy depositors. Depositor heterogeneity and adverse selection, as opposed to market power, are the primary reasons why banks offer far less than the full present value of future rate spreads to depositors.