The Influence of Banking Centralisation 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 regional banks set deposit interest rates in a manner distinct to nationally branching banks. This deviation between changes in the market interest to retail interest rates is characterised by a non-linear mean reverting process. Deposit interest rates offered by regional banks also display lower levels, a slower response to wholesale interest rate increases and a swifter response to wholesale interest rate falls, relative to national banks. It is concluded this evidence is consistent with distinct monetary conditions existing in the UK regions.