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Do banks respond to their friends’ markets? Social spillovers in deposit pricing

Author

Listed:
  • Anyfantaki, Sofia
  • Martynova, Natalya
  • Avramidis, Panagiotis

Abstract

We study how deposit rate shocks transmit across banking markets through digital social ties. Depositors’ inattention implies that households react to outside rate changes only when social networks make these changes salient, inducing connected banks to raise their own rates. Using merger-driven shocks to local deposit rates and county-level social connectedness, we show that small banks increase rates in response to shocks occurring in socially linked but geographically distant counties. Spillovers are economically meaningful, persistent, and stronger in competitive markets and in counties with more financially sophisticated households. Digital social ties therefore activate depositor search and integrate deposit markets across space. JEL Classification: G20, G21, G23, G29

Suggested Citation

  • Anyfantaki, Sofia & Martynova, Natalya & Avramidis, Panagiotis, 2026. "Do banks respond to their friends’ markets? Social spillovers in deposit pricing," Working Paper Series 3178, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20263178
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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