Depositor inertia and bank market power

• Abstract: Depositors don’t need a reason to stay - they just don’t feel like moving.  This paper investigates how depositor inattention, as well as search and switching costs, create deposit market power for banks. Using individual-level survey data and transaction-level data, the paper documents the existence, magnitude and determinants of depositor inertia in the UK. It looks at variation across product lines to analyse the relationship between depositor inertia and market power, along both the pricing and quantity dimensions. The results speak to an important ambiguity illustrated in a stylized model: high switching costs can either strengthen or weaken competition, depending on their size and on initial market structure. Finally, a structural model simulates a counterfactual scenario where depositors can move freely between banks, assessing the implications for consumer welfare, bank profitability, and lending decisions. 

• Early stage work, draft not available.

Suboptimal lending with deposit insurance

• Abstract: The unprecedented use of the systemic risk exception to insure all deposits during the 2023 Regional Banking Crisis revived the debate on deposit insurance and its consequences. This paper develops a theoretical model that explores the moral hazard effects of deposit insurance on banks’ lending decisions, highlighting that these effects vary depending on the bank’s funding structure and deposit supply elasticity. Additionally, it empirically tests the model’s predictions, finding that the relationship between the insured deposit ratio and lending outcomes varies by funding structure. For deposit-funded banks, higher insurance coverage coincides with higher lending, suggesting overlending. In contrast, for banks relying on wholesale funding, the relationship is negative, consistent with underlending due to overhang.

• Presented at: UCL PhD Seminar (February 23, 2023) ; UK Women in Finance Poster Session (March 13, 2025); HEC Liège HYRCE (April 18, 2025); Sveriges Riksbank and CeMoF 4th PhD Workshop in Money and Finance (April 29, 2025).

• Draft available upon request