DP13722 Banks as Patient Lenders: Evidence from a Tax Reform

Author(s):	Elena Carletti, Filippo De Marco, Vasso Ioannidou, Enrico Sette
Publication Date:	May 2019
Keyword(s):	banks, deposits, government guarantee, Maturity, risk-taking
JEL(s):	G01, G21, G28
Programme Areas:	Financial Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13722

We study how a greater reliance on deposits affects bank lending policies. For identification, we exploit a tax reform in Italy that induced households to substitute bank bonds with deposits. We show that the reform led to larger increases (decreases) in term deposits (bonds) in areas where households held more bonds before the reform. We then find that banks with larger increases in deposits did not change their overall credit supply, but increased credit-lines and the maturity of term-loans. These results are consistent with key theories on the role of deposits as a discipline device and of banks as liquidity providers.