The Influence of Banking Centralization on Depositors: Regional Heterogeneities in the Transmission of Monetary Policy

This study examines whether regionally and nationally branching banks set deposits interest rates differently. This assessment of the UK retail deposit market between 1992 and 2008 indicates that regional banks set deposit interest rates in a manner distinct to nationally branching banks. Changes in the market interest rate to retail rates are characterized by a non-linear mean-reverting process. Deposit interest rates offered by regional banks are lower, slower to respond to wholesale interest rate increases, and swiftly respond to wholesale interest rate falls, relative to national banks. This evidence is consistent with distinct monetary conditions existing in UK regions.