Journal of Financial Services Research

, Volume 53, Issue 1, pp 1–35 | Cite as

Deposit Rate Advantages at the Largest Banks

  • Stefan JacewitzEmail author
  • Jonathan Pogach


We estimate differences in funding costs between the largest banks and the rest of the industry in the United States. Using a novel data set on deposit rates offered at the branch level, we document significant pricing advantages at the largest banks on comparable deposit products and deposit risk premiums. Between 2007 and 2008, the risk premium paid by the largest banks was 35 bps lower than the risk premium at other banks. This difference vanishes following a regulatory change in the deposit limit. These findings are consistent with a significant too-big-to-fail subsidy captured by the largest banks through lower risk premiums on uninsured deposits.


Too big to fail Risk premium Deposits Interest rates 



The authors thank Carlos Arteta, William F. Bassett, Steve Burton, Charles Calomiris, V. V. Chari, Bob DeYoung, Alireza Ebrahim, Ron Feldman, Levent Güntay, Robert Hauswald, Paul Kupiec, Randy Kroszner, Myron Kwast, Edith Liu, Oscar Mitnik, Don Morgan, George Pennacchi, Carlos Ramírez, Silvia Ramírez, Haluk Unal, Skander Van den Heuvel, and Smith Williams, participants in seminars at the Federal Reserve Board, the Federal Reserve Bank of Minneapolis, the University of Maryland, the Financial Management Association’s 2012 annual meeting, the 2013 Banking Research Conference, the Research Task Force of the Basel Committee on Banking Supervision and China Banking Regulatory Commission, the International Atlantic Economic Society annual conference, and the Center for Financial Research at the FDIC, as well as an anonymous referee for their valuable comments and suggestions. Any remaining errors are the sole responsibility of the authors.


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Copyright information

© Springer Science+Business Media New York (outside the USA) 2016

Authors and Affiliations

  1. 1.Federal Deposit Insurance CorporationWashington, D.C.USA

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