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Cross-Selling in Bank Household Relationships. Implications for Deposit Pricing, Loan Pricing, and Monetary Policy

Author

Listed:
  • Christoph Basten

    (University of Zurich; Swiss Finance Institute; CESifo (Center for Economic Studies and Ifo Institute))

  • Ragnar Juelsrud

    (Norges Bank)

Abstract

Using administrative data on deposits and loans of every Norwegian with every Norwegian bank, we show that an existing deposit account makes a household more likely to hold deposits at the same bank later despite better alternatives and more likely to borrow there. Consistent with this, banks pay higher deposit rates to potential future borrowers. Then they charge existing depositors a premium on loans compared to other households, suggesting that cross-selling is driven by demand rather than supply complementarities. Finally, discounting future cross-selling profits motivates lower deposit spreads in times of lower policy rates and contributes to monetary policy transmission.

Suggested Citation

  • Christoph Basten & Ragnar Juelsrud, 2022. "Cross-Selling in Bank Household Relationships. Implications for Deposit Pricing, Loan Pricing, and Monetary Policy," Swiss Finance Institute Research Paper Series 22-65, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2265
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    More about this item

    Keywords

    switching costs; customer lifetime value (clv); cross-selling; relationship banking; supply complementarities; demand complementarities; deposit pricing; deposit channel of monetary policy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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