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<p>This paper examines how geographic proximity shapes branch-level deposit rate adjustments, focusing on whether banks align with or differentiate from nearby competitors. Using branch-level data from Q2 2000 onward, we study how large and small banks react to neighbors’ rate movements across CD maturities. Large banks more frequently align upward with nearby peers for long-term deposits, reflecting the value of stable funding. Small banks exhibit a follower pattern when large banks raise rates but maintain distinct pricing when rates decline. In markets composed primarily of small banks, localized alignment re-emerges. Overall, the findings show how maturity, proximity, and institutional size jointly influence deposit rate-setting behavior.</p>

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Bank branch proximity and deposit rate dynamics

  • 期刊论文

  • 发表日期：

    2025年12月22日

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  • Prateek Sharma

摘要

This paper examines how geographic proximity shapes branch-level deposit rate adjustments, focusing on whether banks align with or differentiate from nearby competitors. Using branch-level data from Q2 2000 onward, we study how large and small banks react to neighbors’ rate movements across CD maturities. Large banks more frequently align upward with nearby peers for long-term deposits, reflecting the value of stable funding. Small banks exhibit a follower pattern when large banks raise rates but maintain distinct pricing when rates decline. In markets composed primarily of small banks, localized alignment re-emerges. Overall, the findings show how maturity, proximity, and institutional size jointly influence deposit rate-setting behavior.