Working Paper: CEPR ID: DP13722
Authors: Elena Carletti; Filippo De Marco; Vasso Ioannidou; Enrico Sette
Abstract: We study how a greater reliance on deposits affects bank lending policies. For identification, we exploit a tax reform in Italy that induced households to substitute bank bonds with deposits. We show that the reform led to larger increases (decreases) in term deposits (bonds) in areas where households held more bonds before the reform. We then find that banks with larger increases in deposits did not change their overall credit supply, but increased credit-lines and the maturity of term-loans. These results are consistent with key theories on the role of deposits as a discipline device and of banks as liquidity providers.
Keywords: banks; deposits; maturity; risk-taking; government guarantee
JEL Codes: G21; G28; G01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2011 Italian tax reform (H29) | increase in household deposits (G59) |
| 2011 Italian tax reform (H29) | decrease in holdings of bank bonds (G21) |
| increase in household deposits (G59) | increase in credit lines (E51) |
| increase in household deposits (G59) | longer maturity loans (G21) |
| increase in credit lines (E51) | liquidity insurance to firms (G33) |
| increase in household deposits (G59) | decrease in lending to riskier firms (G21) |