Session 12: Banking and the Deposit Franchise
- Arvind Krishnamurthy (Stanford University)
- Peter DeMarzo (Stanford University)
- Zhiguo He (Stanford University)
- Konstantin Milbradt (University of California, Los Angeles)
Bank deposits are widely viewed as a stable and valuable funding source, yet recent events—most notably the 2022–23 tightening cycle and the regional banking crisis—have renewed questions about how sticky deposits really are, how their value is created, and when that value can disappear abruptly. This session brings together recent empirical and theoretical work that reexamines the deposit franchise as a central determinant of banks’ interest-rate risk exposure, funding stability, and monetary transmission.
The session focuses on three interrelated themes:
(i) how deposit stickiness is measured and inferred from data,
(ii) the mechanisms through which banks build and maintain deposit franchises (pricing, geography, technology, and balance-sheet choices), and
(iii) the implications of deposit franchise value for risk-taking, fragility, and regulation.