paolo mistrulli - Profile on Academia.edu (original) (raw)

Papers by paolo mistrulli

Social Science Research Network, 2009

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.

The cost of steering in financial markets: evidence from the mortgage market

RePEc: Research Papers in Economics, Dec 1, 2019

Abstract We build a model of the mortgage market in which banks attain their optimal mortgage por... more Abstract We build a model of the mortgage market in which banks attain their optimal mortgage portfolio by setting rates and steering customers. Sophisticated households know which mortgage type is best for them; naive households are susceptible to banks’ steering. Using data on the universe of Italian mortgages, we estimate the model and quantify the welfare implications of steering. The average cost of the distortion is equivalent to 16% of the annual mortgage payment. A financial literacy campaign is beneficial for naive households, but hurts sophisticated ones. Since steering also conveys information about mortgages, restricting steering might result in significant welfare losses.

RePEc: Research Papers in Economics, Jul 1, 2015

We propose a new, data-based test for the presence of biased …nancial advice when households choo... more We propose a new, data-based test for the presence of biased …nancial advice when households choose between …xed and adjustable rate mortgages. If households are wary, the relative cost of the two types should be a su¢ cient statistic for a household contract choice: the attributes of the bank that makes the loan should play no role. If households rely on banks'advice to guide their choice, banks may be tempted to bias their counsel to their own advantage. In this case bank-speci…c supply characteristics will play a role in the household's choice above any role they play through relative prices. Testing this hypothesis on a sample of 1.6 million mortgages originated in Italy between 2004 and 2010, we …nd that the choice between adjustable and …xed rates is signi…cantly a¤ected by change in banks' supply factors, especially in periods during which banks do not change the relative price of the two mortgage types. This supports the view that banks are able to a¤ect customers'mortgage choices not only by pricing but also through an advice channel.

Social Science Research Network, 2007

Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may ... more Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may represent a channel for contagion as a bank default may spread to other banks through interbank linkages. This paper analyses how contagion propagates within the Italian interbank market using a unique data set including actual bilateral exposures. Based on the availability of information on actual bilateral exposures for all Italian banks, the results obtained by assuming the maximum entropy are compared with those reflecting the observed structure of interbank claims. The comparison indicates that, under certain circumstances, depending on the structure of the interbank linkages, the recovery rates of interbank exposures and banks' capitalisation, the maximum entropy approach overrates the scope for contagion.

The role of credit lines and multiple lending in financial contagion and systemic events

Journal of Financial Stability, Aug 1, 2023

Le emissioni delle banche italiane sull’euromercato (The Eurobond Issues of Italian Banks)

DOAJ (DOAJ: Directory of Open Access Journals), Dec 1, 2003

After the launch of the single European currency banks of the main euro-area countries have incre... more After the launch of the single European currency banks of the main euro-area countries have increasingly issued bonds on the Euromarket. In this paper, I investigate the determinants of Italian banks' recourse to international capital markets. I find that, other things being equal, domestic market conditions affect the choice whether to issue Eurobonds. In particular, the econometric analysis highlights that those banks, which are more prone to issue bonds on the Euromarket, are more exposed to liquidity risks and are less specialized in raising deposits on specific domestic submarkets. JEL Codes: G21 Keywords: Bank

Social Science Research Network, 2008

for their useful comments; Guido de Blasio and Luigi Zingales for providing data on social capita... more for their useful comments; Guido de Blasio and Luigi Zingales for providing data on social capital. The views expressed are those of the authors and do not necessarily reflect those of the Bank of Italy nor the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Le emissioni delle banche italiane sull'euromercato *

Moneta e Credito, 2003

After the launch of the single European currency banks of the main euro-area countries have incre... more After the launch of the single European currency banks of the main euro-area countries have increasingly issued bonds on the Euromarket. In this paper, I investigate the determinants of Italian banks' recourse to international capital markets. I find that, other things being equal, domestic market conditions affect the choice whether to issue Eurobonds. In particular, the econometric analysis highlights that those banks, which are more prone to issue bonds on the Euromarket, are more exposed to liquidity risks and are less specialized in raising deposits on specific domestic submarkets. JEL Codes: G21 Keywords: Bank

Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may ... more Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may represent a channel for contagion since a bank default may spread to solvent banks through interbank linkages. This paper investigates the link between the structural evolution of the Italian interbank market and the risk of financial contagion in the 1990-2003 period. By using a unique data set on bilateral exposures for all Italian banks it adds to the existing literature aiming at measuring systemic risk in many respects. Firstly, it shows that the estimation procedure widely used by other authors to obtain bilateral exposures from aggregated data implies a large bias in the estimation of the extent of financial contagion and that the sign of the bias itself is ambiguous depending on the recovery rates of interbank exposures at default. Secondly, this paper compares domestic and foreign shocks indicating that, notwithstanding financial integration, domestic shocks are still more relevant than foreign ones. Finally, the availability of actual bilateral exposures allows to show that the interbank market structure changed from an almost "complete" one (where all banks are symmetrically financially linked) to a "multiple money center" structure (where the money centers are linked to some banks which are themselves not reciprocally linked). This structural change has implied that the risk of contagion has increased overtime, especially after the first half of the '90s when financial consolidation gained momentum.

Social Science Research Network, 2011

A substantial literature has investigated the role of relationship lending in shielding borrowers... more A substantial literature has investigated the role of relationship lending in shielding borrowers from idiosyncratic shocks. Much less is known about how lending relationships and bank-specific characteristics affect the functioning of the credit market in an economywide crisis, when banks may find it difficult to perform the role of shock absorbers. We investigate how bank-specific characteristics (size, liquidity, capitalization, funding structure) and the bank-firm relationship have influenced interest rate setting since the collapse of Lehman Brothers. Unlike the existing literature, which has focused chiefly on the amount of credit granted during the crisis, we look at its cost. The data on a large sample of loans from Italian banks to non-financial firms suggest that close lending relationships kept firms more insulated from the financial crisis. Further, spreads increased by less for the customers of well-capitalized, liquid banks and those engaged mainly in traditional lending business.

Social Science Research Network, 2010

A vast literature has emphasized that small banks are at a comparative advantage in small busines... more A vast literature has emphasized that small banks are at a comparative advantage in small business lending. In this paper, we show that apart from size, which is negatively correlated with bank specialization in small business lending, organizational characteristics affect bank loan portfolio choices. By using a unique dataset based on a recent survey of Italian banks, we find that after having controlled for bank size, a branch loan officer's authority has a key role in explaining bank specialization in small business lending. In particular, banks which delegate more decision-making power to their branch loan officers are more willing to lend to small firms than other banks. We approximate loan officers' authority by controlling for several factors which shape their incentives: loan officer turnover, the amount of money up to which they are allowed to lend autonomously, their role in loan approval and in setting loan interest rates, the kind of information (soft versus hard information) used for screening and monitoring borrowers, and the structure of their compensation schemes.

Journal of Financial Economics, Mar 1, 2022

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

Job Protection and Mortgage Conditions: Evidence from Italian Administrative Data*

Oxford Bulletin of Economics and Statistics, Apr 19, 2023

Social Science Research Network, 2017

Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.

Distance, Lending Technologies and Interest Rates

Social Science Research Network, 2008

... to thank Ugo Albertazzi, Luigi Benfratello, Marcello Bofondi, Martin Brown, Giuseppe Cappelle... more ... to thank Ugo Albertazzi, Luigi Benfratello, Marcello Bofondi, Martin Brown, Giuseppe Cappelletti, Francesco Columba, Leonardo Gambacorta, Andrea Generale, Giorgio Gobbi, Moshe Kim, Francesca Lotti, David Marques, Jozsef Molnar, Alberto Pozzolo, Paola Rossi, Fabiano ...

Empirical Economics, Sep 1, 2005

This paper studies the features of de novo Cooperative Credit Banks (CCBs) established in Italy d... more This paper studies the features of de novo Cooperative Credit Banks (CCBs) established in Italy during the 1990s. It shows that de novo CCBs in the start-up period are endowed with a higher default risk than long-run incumbent CCBs. Split-population duration models distiguish the determinants of duration and probability of default. The focus is on those determinants related to market structure. We find that duration is positively related to the market share of large banks. Conversely, duration is higher when there are no incumbent CCBs in the same market. Survival probability is directly related to the local level of GDP.

Credit supply, uncertainty and trust: the role of social capital

RePEc: Research Papers in Economics, 2019

Despite social capital being widely acknowledged as a key factor in the functioning of financial ... more Despite social capital being widely acknowledged as a key factor in the functioning of financial markets, the evidence on the channels through which it operates is still scant. In this paper we isolate one possible channel and investigate whether social capital plays a role in mitigating the impact of uncertainty shocks on bank credit supply. We exploit both the huge rise in the level of uncertainty that followed the Lehman Brothers default and a very granular and rich loan-level dataset from the Italian Credit register that allows us to clearly disentangle demand and supply factors. We find that social capital makes credit markets more resilient to uncertainty shocks, especially when informational asymmetries between banks and borrowers are more severe.

RePEc: Research Papers in Economics, Jun 1, 2017

Many households lack the sophistication required to make complex financial decisions and risk bei... more Many households lack the sophistication required to make complex financial decisions and risk being exploited when seeking advice from intermediaries. We build a model of financial advice, in which banks attain their optimal mortgage portfolio by setting rates and providing advice to their clientele. "Sophisticated" households know which mortgage type is best for them; "naive" are susceptible to the bank's advice. Using data on the universe of Italian mortgages, we estimate the model and quantify the welfare implications of distorted financial advice. The average cost of the distortion is equivalent to an increase in the annual mortgage payment by 11%. However, since even distorted advice conveys information, banning advice altogether results in a loss of 998 euros per year on average. A financial literacy campaign is beneficial for naive households, but hurts sophisticated ones.

RePEc: Research Papers in Economics, Mar 1, 1996

We propose a new, data-based test for the presence of biased …nancial advice when households choo... more We propose a new, data-based test for the presence of biased …nancial advice when households choose between …xed and adjustable rate mortgages. If households are wary, the relative cost of the two types should be a su¢ cient statistic for a household contract choice: the attributes of the bank that makes the loan should play no role. If households rely on banks'advice to guide their choice, banks may be tempted to bias their counsel to their own advantage. In this case bank-speci…c characteristics will play a role in the household's choice. Testing this hypothesis on a sample of 1.6 million mortgages originated in Italy between 2004 and 2010, we …nd that the choice between adjustable and …xed rates is signi…cantly a¤ected by banks' characteristics, especially in periods during which banks do not change the relative price of the two mortgage types. This supports the view that banks are able to a¤ect customers'mortgage choices not only by pricing but also through an advice channel.

Social Science Research Network, 2009

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS.

The cost of steering in financial markets: evidence from the mortgage market

RePEc: Research Papers in Economics, Dec 1, 2019

Abstract We build a model of the mortgage market in which banks attain their optimal mortgage por... more Abstract We build a model of the mortgage market in which banks attain their optimal mortgage portfolio by setting rates and steering customers. Sophisticated households know which mortgage type is best for them; naive households are susceptible to banks’ steering. Using data on the universe of Italian mortgages, we estimate the model and quantify the welfare implications of steering. The average cost of the distortion is equivalent to 16% of the annual mortgage payment. A financial literacy campaign is beneficial for naive households, but hurts sophisticated ones. Since steering also conveys information about mortgages, restricting steering might result in significant welfare losses.

RePEc: Research Papers in Economics, Jul 1, 2015

We propose a new, data-based test for the presence of biased …nancial advice when households choo... more We propose a new, data-based test for the presence of biased …nancial advice when households choose between …xed and adjustable rate mortgages. If households are wary, the relative cost of the two types should be a su¢ cient statistic for a household contract choice: the attributes of the bank that makes the loan should play no role. If households rely on banks'advice to guide their choice, banks may be tempted to bias their counsel to their own advantage. In this case bank-speci…c supply characteristics will play a role in the household's choice above any role they play through relative prices. Testing this hypothesis on a sample of 1.6 million mortgages originated in Italy between 2004 and 2010, we …nd that the choice between adjustable and …xed rates is signi…cantly a¤ected by change in banks' supply factors, especially in periods during which banks do not change the relative price of the two mortgage types. This supports the view that banks are able to a¤ect customers'mortgage choices not only by pricing but also through an advice channel.

Social Science Research Network, 2007

Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may ... more Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may represent a channel for contagion as a bank default may spread to other banks through interbank linkages. This paper analyses how contagion propagates within the Italian interbank market using a unique data set including actual bilateral exposures. Based on the availability of information on actual bilateral exposures for all Italian banks, the results obtained by assuming the maximum entropy are compared with those reflecting the observed structure of interbank claims. The comparison indicates that, under certain circumstances, depending on the structure of the interbank linkages, the recovery rates of interbank exposures and banks' capitalisation, the maximum entropy approach overrates the scope for contagion.

The role of credit lines and multiple lending in financial contagion and systemic events

Journal of Financial Stability, Aug 1, 2023

Le emissioni delle banche italiane sull’euromercato (The Eurobond Issues of Italian Banks)

DOAJ (DOAJ: Directory of Open Access Journals), Dec 1, 2003

After the launch of the single European currency banks of the main euro-area countries have incre... more After the launch of the single European currency banks of the main euro-area countries have increasingly issued bonds on the Euromarket. In this paper, I investigate the determinants of Italian banks' recourse to international capital markets. I find that, other things being equal, domestic market conditions affect the choice whether to issue Eurobonds. In particular, the econometric analysis highlights that those banks, which are more prone to issue bonds on the Euromarket, are more exposed to liquidity risks and are less specialized in raising deposits on specific domestic submarkets. JEL Codes: G21 Keywords: Bank

Social Science Research Network, 2008

for their useful comments; Guido de Blasio and Luigi Zingales for providing data on social capita... more for their useful comments; Guido de Blasio and Luigi Zingales for providing data on social capital. The views expressed are those of the authors and do not necessarily reflect those of the Bank of Italy nor the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Le emissioni delle banche italiane sull'euromercato *

Moneta e Credito, 2003

After the launch of the single European currency banks of the main euro-area countries have incre... more After the launch of the single European currency banks of the main euro-area countries have increasingly issued bonds on the Euromarket. In this paper, I investigate the determinants of Italian banks' recourse to international capital markets. I find that, other things being equal, domestic market conditions affect the choice whether to issue Eurobonds. In particular, the econometric analysis highlights that those banks, which are more prone to issue bonds on the Euromarket, are more exposed to liquidity risks and are less specialized in raising deposits on specific domestic submarkets. JEL Codes: G21 Keywords: Bank

Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may ... more Interbank markets allow banks to cope with specific liquidity shocks. At the same time, they may represent a channel for contagion since a bank default may spread to solvent banks through interbank linkages. This paper investigates the link between the structural evolution of the Italian interbank market and the risk of financial contagion in the 1990-2003 period. By using a unique data set on bilateral exposures for all Italian banks it adds to the existing literature aiming at measuring systemic risk in many respects. Firstly, it shows that the estimation procedure widely used by other authors to obtain bilateral exposures from aggregated data implies a large bias in the estimation of the extent of financial contagion and that the sign of the bias itself is ambiguous depending on the recovery rates of interbank exposures at default. Secondly, this paper compares domestic and foreign shocks indicating that, notwithstanding financial integration, domestic shocks are still more relevant than foreign ones. Finally, the availability of actual bilateral exposures allows to show that the interbank market structure changed from an almost "complete" one (where all banks are symmetrically financially linked) to a "multiple money center" structure (where the money centers are linked to some banks which are themselves not reciprocally linked). This structural change has implied that the risk of contagion has increased overtime, especially after the first half of the '90s when financial consolidation gained momentum.

Social Science Research Network, 2011

A substantial literature has investigated the role of relationship lending in shielding borrowers... more A substantial literature has investigated the role of relationship lending in shielding borrowers from idiosyncratic shocks. Much less is known about how lending relationships and bank-specific characteristics affect the functioning of the credit market in an economywide crisis, when banks may find it difficult to perform the role of shock absorbers. We investigate how bank-specific characteristics (size, liquidity, capitalization, funding structure) and the bank-firm relationship have influenced interest rate setting since the collapse of Lehman Brothers. Unlike the existing literature, which has focused chiefly on the amount of credit granted during the crisis, we look at its cost. The data on a large sample of loans from Italian banks to non-financial firms suggest that close lending relationships kept firms more insulated from the financial crisis. Further, spreads increased by less for the customers of well-capitalized, liquid banks and those engaged mainly in traditional lending business.

Social Science Research Network, 2010

A vast literature has emphasized that small banks are at a comparative advantage in small busines... more A vast literature has emphasized that small banks are at a comparative advantage in small business lending. In this paper, we show that apart from size, which is negatively correlated with bank specialization in small business lending, organizational characteristics affect bank loan portfolio choices. By using a unique dataset based on a recent survey of Italian banks, we find that after having controlled for bank size, a branch loan officer's authority has a key role in explaining bank specialization in small business lending. In particular, banks which delegate more decision-making power to their branch loan officers are more willing to lend to small firms than other banks. We approximate loan officers' authority by controlling for several factors which shape their incentives: loan officer turnover, the amount of money up to which they are allowed to lend autonomously, their role in loan approval and in setting loan interest rates, the kind of information (soft versus hard information) used for screening and monitoring borrowers, and the structure of their compensation schemes.

Journal of Financial Economics, Mar 1, 2022

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

Job Protection and Mortgage Conditions: Evidence from Italian Administrative Data*

Oxford Bulletin of Economics and Statistics, Apr 19, 2023

Social Science Research Network, 2017

Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.

Distance, Lending Technologies and Interest Rates

Social Science Research Network, 2008

... to thank Ugo Albertazzi, Luigi Benfratello, Marcello Bofondi, Martin Brown, Giuseppe Cappelle... more ... to thank Ugo Albertazzi, Luigi Benfratello, Marcello Bofondi, Martin Brown, Giuseppe Cappelletti, Francesco Columba, Leonardo Gambacorta, Andrea Generale, Giorgio Gobbi, Moshe Kim, Francesca Lotti, David Marques, Jozsef Molnar, Alberto Pozzolo, Paola Rossi, Fabiano ...

Empirical Economics, Sep 1, 2005

This paper studies the features of de novo Cooperative Credit Banks (CCBs) established in Italy d... more This paper studies the features of de novo Cooperative Credit Banks (CCBs) established in Italy during the 1990s. It shows that de novo CCBs in the start-up period are endowed with a higher default risk than long-run incumbent CCBs. Split-population duration models distiguish the determinants of duration and probability of default. The focus is on those determinants related to market structure. We find that duration is positively related to the market share of large banks. Conversely, duration is higher when there are no incumbent CCBs in the same market. Survival probability is directly related to the local level of GDP.

Credit supply, uncertainty and trust: the role of social capital

RePEc: Research Papers in Economics, 2019

Despite social capital being widely acknowledged as a key factor in the functioning of financial ... more Despite social capital being widely acknowledged as a key factor in the functioning of financial markets, the evidence on the channels through which it operates is still scant. In this paper we isolate one possible channel and investigate whether social capital plays a role in mitigating the impact of uncertainty shocks on bank credit supply. We exploit both the huge rise in the level of uncertainty that followed the Lehman Brothers default and a very granular and rich loan-level dataset from the Italian Credit register that allows us to clearly disentangle demand and supply factors. We find that social capital makes credit markets more resilient to uncertainty shocks, especially when informational asymmetries between banks and borrowers are more severe.

RePEc: Research Papers in Economics, Jun 1, 2017

Many households lack the sophistication required to make complex financial decisions and risk bei... more Many households lack the sophistication required to make complex financial decisions and risk being exploited when seeking advice from intermediaries. We build a model of financial advice, in which banks attain their optimal mortgage portfolio by setting rates and providing advice to their clientele. "Sophisticated" households know which mortgage type is best for them; "naive" are susceptible to the bank's advice. Using data on the universe of Italian mortgages, we estimate the model and quantify the welfare implications of distorted financial advice. The average cost of the distortion is equivalent to an increase in the annual mortgage payment by 11%. However, since even distorted advice conveys information, banning advice altogether results in a loss of 998 euros per year on average. A financial literacy campaign is beneficial for naive households, but hurts sophisticated ones.

RePEc: Research Papers in Economics, Mar 1, 1996

We propose a new, data-based test for the presence of biased …nancial advice when households choo... more We propose a new, data-based test for the presence of biased …nancial advice when households choose between …xed and adjustable rate mortgages. If households are wary, the relative cost of the two types should be a su¢ cient statistic for a household contract choice: the attributes of the bank that makes the loan should play no role. If households rely on banks'advice to guide their choice, banks may be tempted to bias their counsel to their own advantage. In this case bank-speci…c characteristics will play a role in the household's choice. Testing this hypothesis on a sample of 1.6 million mortgages originated in Italy between 2004 and 2010, we …nd that the choice between adjustable and …xed rates is signi…cantly a¤ected by banks' characteristics, especially in periods during which banks do not change the relative price of the two mortgage types. This supports the view that banks are able to a¤ect customers'mortgage choices not only by pricing but also through an advice channel.