Deposit Withdrawals from Distressed Banks: Client Relationships Matter

Item Type	Journal paper
Abstract	We study retail deposit withdrawals from commercial banks that were differentially exposed to distress during the 2007-2009 financial crisis. We show that the propensity of clients to withdraw deposits increases with the severity of bank distress. However, an exclusive pre-crisis bank-client relationship eliminates withdrawal risk. The mechanism through which strong bank-client relationships mitigate withdrawal risk relates to the transaction costs of switching accounts rather than informational rents or differentiated services. Our findings provide empirical support to the Basel III liquidity regulations that emphasize the role of well-established client relationships for the stability of bank funding.
Authors	Brown, Martin; Morkötter, Stefan & Guin, Benjamin
Journal or Publication Title	Journal of Financial Stability
Language	English
Keywords	Liquidity Risk, Relationship Banking, Market Discipline
Subjects	business studies economics finance
HSG Classification	contribution to scientific community
HSG Profile Area	SOF - System-wide Risk in the Financial System
Refereed	Yes
Date	February 2020
Publisher	Elsevier
Volume	Vol. 46
Publisher DOI	https://doi.org/10.1016/j.jfs.2019.100707
Official URL	https://www.sciencedirect.com/science/article/pii/...
Contact Email Address	martin.brown@unisg.ch
Depositing User	Prof. Dr. Martin Brown
Date Deposited	04 Nov 2013 12:00
Last Modified	20 Jul 2022 17:18
URI:	https://www.alexandria.unisg.ch/publications/227118

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Brown, Martin; Morkötter, Stefan & Guin, Benjamin (2020) Deposit Withdrawals from Distressed Banks: Client Relationships Matter. Journal of Financial Stability, Vol. 46

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https://www.alexandria.unisg.ch/id/eprint/227118

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