Multimarket bank pricing: An empirical investigation of deposit interest rates

This paper examines the determinants of deposit interest rates offered by large, geographically diversified banking organizations. We find that these organizations offer lower deposit rates than do their smaller counterparts and that, even after controlling for organization size, deposit interest rates are negatively related to the number of local banking markets in which the organization operates. We also find that concentration measured at the state level is more strongly and consistently related to deposit interest rates than is a weighted average of local market concentration. These results have potentially important implications regarding the nature of competition in retail banking markets.