Banking market conditions and deposit interest rates

Abstract

This paper shows that the impact of market structure on bank deposit interest rates is complex. Both market size structure and multimarket bank presence have independent effects on rates. There is evidence that mid-size banks were more aggressive competitors than other banks, but that the effect of market structure on deposit rates has evolved over time, with mega-banks recently becoming more aggressive competitors. This may be related to the growth of mega-banks in many markets. These findings have implications for existing theories of deposit pricing and, by extension, antitrust policy in banking.