The Deposit Market Revolution in Sweden

Financial organizations have an important role in countries’ economic performance as they can exploit investment synergies and encourage output growth through the capital stock.1 One particular task for these intermediaries is to attract households’ savings. The intermediaries permit households to move resources through time to better meet their temporal consumption preferences, as such preferences seldom are perfectly synchronized with income flows.2Depositors help secure liquidity and make credit accessible, both locally and nationally. It is therefore very important to convert from unproductive liquid (and real) assets to assets available to the financial sector. The possibility for the intermediating sector to increase its size (in terms of both physical locations as well as total assets) depends on its efficiency and to what extent it can offer a wide range of services to its customers.3Banks attract deposits and capital through their ability to diversify and thereby satisfy different interests on the part of savers and investors. Their ability to respond and adjust to the market has been shown to have a spin-off effect also on the early securities market.4Banks and securities markets may therefore be regarded as complementary, and as such, mutually reinforce each other in mobilizing capital, rather than merely serving as substitutes for one another.5The financial intermediaries are also highly dependent on having a good reputation for being stable, well-functioning and trustworthy organizations.