N°24-36: Monetary Policy Transmission Through Cross-Selling Banks*

We show theoretically and empirically how banks' opportunities to crosssell their depositors loans later affect monetary policy transmission. Expected later lending profits motivate banks to set lower deposit spreads to onboard and retain depositors, more the lower policy rates and the greater a bank's cross-selling opportunities. With data on every Norwegian bank household relationship, we exploit that loan cross-sales vary with demographics and so across municipalities. Comparing bank-municipality cells within each bank-year to control for refinancing needs, we find that banks with more cross-selling potential cut deposit spreads more following policy rate cuts and exhibit higher deposit and loan growth.