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Deregulation, Deposit Markets, and Banks' Costs of Funds

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  • Bundt, Thomas P
  • Schweitzer, Robert

Abstract

Deposit interest rate deregulation and financial service innovation have led to dramatic changes in large banks' deposit composition. This paper presents a statistical cost analysis of changes in unit costs faced by banks under comprehensive financial deregulation. The results of this paper show that the unit cost of retail deposits--demand and passbook savings deposits--has increased relative to wholesale deposits--federal funds, certificates of deposit, and money market time deposits. The authors show, contrary to conventional wisdom, that changes in unit costs have been caused by processing costs rather than by interest expenses. Copyright 1989 by MIT Press.

Suggested Citation

  • Bundt, Thomas P & Schweitzer, Robert, 1989. "Deregulation, Deposit Markets, and Banks' Costs of Funds," The Financial Review, Eastern Finance Association, vol. 24(3), pages 417-430, August.
    • Handle: RePEc:bla:finrev:v:24:y:1989:i:3:p:417-30
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    Cited by:

    1. Betubiza, Eustacius N. & Leatham, David J., 1995. "Factors Affecting Commercial Bank Lending to Agriculture," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 27(1), pages 112-126, July.

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