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Deposit Rate Advantages at the Largest Banks

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  • Stefan Jacewitz

    (Federal Deposit Insurance Corporation)

  • Jonathan Pogach

    (Federal Deposit Insurance Corporation)

Abstract

We estimate differences in funding costs between the largest banks and the rest of the industry in the United States. Using a novel data set on deposit rates offered at the branch level, we document significant pricing advantages at the largest banks on comparable deposit products and deposit risk premiums. Between 2007 and 2008, the risk premium paid by the largest banks was 35 bps lower than the risk premium at other banks. This difference vanishes following a regulatory change in the deposit limit. These findings are consistent with a significant too-big-to-fail subsidy captured by the largest banks through lower risk premiums on uninsured deposits.

Suggested Citation

  • Stefan Jacewitz & Jonathan Pogach, 2018. "Deposit Rate Advantages at the Largest Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 53(1), pages 1-35, February.
    • Handle: RePEc:kap:jfsres:v:53:y:2018:i:1:d:10.1007_s10693-016-0261-2
    DOI: 10.1007/s10693-016-0261-2
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