ECB Working Paper No. 2026/3178 73 Pages Posted: 30 Jan 2026 European Central Bank, Financial Research Division; Bank of Greece Deutsche Bundesbank - Research Centre ALBA Graduate Business School Date Written: January, 2026 We study how deposit rate shocks transmit across banking markets through digital social ties. Depositors’ inattention implies that households react to outside rate changes only when social networks make these changes salient, inducing connected banks to raise their own rates. Using merger-driven shocks to local deposit rates and county-level social connectedness, we show that small banks increase rates in response to shocks occurring in socially linked but geographically distant counties. Spillovers are economically meaningful, persistent, and stronger in competitive markets and in counties with more financially sophisticated households. Digital social ties therefore activate depositor search and integrate deposit markets across space. Keywords: deposit pricing, information transmission, limited attention, social connections, uniform pricing JEL Classification: G20, G21, G23, G29 Suggested Citation: Suggested Citation Greece Wilhelm-Epstein-Str. 14 Frankfurt/Main, 60431 Germany Xenias 6-8 Athens, Athens 11528 Greece European Central Bank Research Paper Series Subscribe to this free journal for more curated articles on this topic
Anyfantaki et al. (Thu,) studied this question.