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To stay or go? Consumer bank switching behaviour after government interventions

Author

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  • Maaike Diepstraten
  • Carin van der Cruijsen

Abstract

We analyse whether and how individual savings and current accounts holders respond to government interventions at banks. We are the first to employ a difference-in-difference analysis, distinguish between a nationalisation and a capital injection, and separate between the two banking products. We find that the aggregate switching behaviour of consumers at intervened banks is similar before and after the troubles and intervention. This holds for both type of interventions, both type of products, and for switching from and to the intervened bank. However, we show heterogeneity in consumer responses to government interventions, depending on the type of intervention and banking product. For example, compared to consumers who trust the government, consumers with no or little trust are more likely to switch away from a bank after a nationalisation, relative to customers of the control bank. This holds for switching with the savings and current account. This highlights that trust in the government is an important prerequisite for a successful nationalisation. Second, responses depend on consumers' level of risk aversion. Risk averse current account holders at a nationalised bank are more likely to switch away than customers of the control bank. This result indicates that interventions can make consumers more aware of the troubles the intervened bank faces, and result in an outflow of consumers if a large share is risk averse.

Suggested Citation

  • Maaike Diepstraten & Carin van der Cruijsen, 2017. "To stay or go? Consumer bank switching behaviour after government interventions," DNB Working Papers 550, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:550
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    consumer bank switching; bail-outs; capital injection; nationalisation; trust in the government; risk aversion;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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