Bank Switching and Interest Rates: Examining Annual Transfers Between Savings Accounts

We study the savings transfers between banks by retail depositors. Our sample comprises annual savings account data from the Netherlands for the period from 2004 to 2014. We control for demographic factors and find that the differences in interest rates across savings accounts help explain the extent to which depositors reallocate their savings to either a newly opened or an existing account. The depositors in our sample transfer between 3 and 6% of their savings for each percentage point difference in the interest rates. This effect is robust across various selected samples and model specifications. In addition, we show that depositors transfer a higher proportion of their deposits during the 2008–2009 financial crisis than during non-crisis years. During that crisis, the difference in interest rates remained a highly important determinant of transfer behavior.