Cross-Selling in Bank Household Relationships. Implications for Deposit Pricing, Loan Pricing, and Monetary Policy

Using administrative data on deposits and loans of every Norwegian with every Norwegian bank, we show that an existing deposit account makes a household more likely to hold deposits at the same bank later despite better alternatives and more likely to borrow there. Consistent with this, banks pay higher deposit rates to potential future borrowers. Then they charge existing depositors a premium on loans compared to other households, suggesting that cross-selling is driven by demand rather than supply complementarities. Finally, discounting future cross-selling profits motivates lower deposit spreads in times of lower policy rates and contributes to monetary policy transmission