Deposit Rate Advantages at Big Banks

beSpacific 2013-07-22

Deposit Rate Advantages at the Largest Banks, Stefan Jacewitz - Federal Deposit Insurance Corporation; Jonathan Pogach - Federal Deposit Insurance Corporation, May 31, 2013

“We estimate differences in funding costs between the largest banks and the rest of the industry. Using deposit rates offered at the branch level, we eliminate many non-risk related differences between banks. We document significant and persistent pricing advantages at the largest banks for comparable deposit products and deposit risk premiums. Between 2005 and 2008, the risk premium paid by the largest banks was 15-40 bps lower than at other banks, even after controlling for common risk variables. These findings are consistent with an economically significant too-big-to-fail subsidy paid to the largest banks through lower risk premiums on uninsured deposits.”


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