To Stay or Go? Consumer Bank Switching Behaviour After Government Interventions

Maaike Diepstraten, Carin van der Cruijsen

Research output: Working paperOther research output

Abstract

We analyse whether and how individual savings and current accounts holders respond to government interventions at banks. We are the first to employ a difference-in-difference analysis, distinguish between a nationalisation and a capital injection, and separate between the two banking products. We find that the aggregate switching behaviour of consumers at intervened banks is similar
before and after the troubles and intervention. This holds for both type of interventions, both type of products, and for switching from and to the intervened bank. However, we show heterogeneity in consumer responses to government interventions, depending on the type of intervention and banking
product. For example, compared to consumers who trust the government, consumers with no or little trust are more likely to switch away from a bank after a nationalisation, relative to customers of the control bank. This holds for switching with the savings and current account. This highlights that trust in the government is an important prerequisite for a successful nationalisation. Second,
responses depend on consumers’ level of risk aversion. Risk averse current account holders at a nationalised bank are more likely to switch away than customers of the control bank. This result indicates that interventions can make consumers more aware of the troubles the intervened bank faces, and result in an outflow of consumers if a large share is risk averse.
Original languageEnglish
Place of PublicationAmsterdam
PublisherDNB
Pages40
Publication statusPublished - 17 Mar 2017

Publication series

NameDNB Working Paper
No.550

Fingerprint

Government intervention
Switching behavior
Current account
Nationalization
Government
Risk-averse
Savings
Difference-in-differences
Banking
Injection
Risk aversion
Consumer response

Keywords

  • consumer bank switching
  • bail-outs
  • capital injection
  • nationalisation
  • trust in the government
  • risk aversion

Cite this

Diepstraten, M., & van der Cruijsen, C. (2017). To Stay or Go? Consumer Bank Switching Behaviour After Government Interventions. (pp. 40). (DNB Working Paper; No. 550). Amsterdam: DNB.
Diepstraten, Maaike ; van der Cruijsen, Carin. / To Stay or Go? Consumer Bank Switching Behaviour After Government Interventions. Amsterdam : DNB, 2017. pp. 40 (DNB Working Paper; 550).
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Diepstraten, M & van der Cruijsen, C 2017 'To Stay or Go? Consumer Bank Switching Behaviour After Government Interventions' DNB Working Paper, no. 550, DNB, Amsterdam, pp. 40.

To Stay or Go? Consumer Bank Switching Behaviour After Government Interventions. / Diepstraten, Maaike; van der Cruijsen, Carin.

Amsterdam : DNB, 2017. p. 40 (DNB Working Paper; No. 550).

Research output: Working paperOther research output

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N2 - We analyse whether and how individual savings and current accounts holders respond to government interventions at banks. We are the first to employ a difference-in-difference analysis, distinguish between a nationalisation and a capital injection, and separate between the two banking products. We find that the aggregate switching behaviour of consumers at intervened banks is similarbefore and after the troubles and intervention. This holds for both type of interventions, both type of products, and for switching from and to the intervened bank. However, we show heterogeneity in consumer responses to government interventions, depending on the type of intervention and bankingproduct. For example, compared to consumers who trust the government, consumers with no or little trust are more likely to switch away from a bank after a nationalisation, relative to customers of the control bank. This holds for switching with the savings and current account. This highlights that trust in the government is an important prerequisite for a successful nationalisation. Second,responses depend on consumers’ level of risk aversion. Risk averse current account holders at a nationalised bank are more likely to switch away than customers of the control bank. This result indicates that interventions can make consumers more aware of the troubles the intervened bank faces, and result in an outflow of consumers if a large share is risk averse.

AB - We analyse whether and how individual savings and current accounts holders respond to government interventions at banks. We are the first to employ a difference-in-difference analysis, distinguish between a nationalisation and a capital injection, and separate between the two banking products. We find that the aggregate switching behaviour of consumers at intervened banks is similarbefore and after the troubles and intervention. This holds for both type of interventions, both type of products, and for switching from and to the intervened bank. However, we show heterogeneity in consumer responses to government interventions, depending on the type of intervention and bankingproduct. For example, compared to consumers who trust the government, consumers with no or little trust are more likely to switch away from a bank after a nationalisation, relative to customers of the control bank. This holds for switching with the savings and current account. This highlights that trust in the government is an important prerequisite for a successful nationalisation. Second,responses depend on consumers’ level of risk aversion. Risk averse current account holders at a nationalised bank are more likely to switch away than customers of the control bank. This result indicates that interventions can make consumers more aware of the troubles the intervened bank faces, and result in an outflow of consumers if a large share is risk averse.

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Diepstraten M, van der Cruijsen C. To Stay or Go? Consumer Bank Switching Behaviour After Government Interventions. Amsterdam: DNB. 2017 Mar 17, p. 40. (DNB Working Paper; 550).