The Determinants of Household's Bank Switching

Using a unique panel dataset from 2006-2012 Bank of Italy Survey on Household Income and Wealth that links households to their main bank, we are able to investigate the determinants of bank switching by households. Household-bank relationship matters crucially in terms of exclusivity (using a single bank), intensity (number of services used), and scope (type of services used) of the relationship. Specifically, we find that what really drives switching is mortgage, both taking out and paying off . In addition we fi nd that switching costs reduce the probability of switching. We also find robust evidence that risk preferences, mobility and economic condition of the household do not play any role, while education and financial literacy do matter, albeit with opposite e ffects. Last but not least, changing bank is less frequent for cooperative bank and more frequent for listed banks, after controlling for bank competition.