Bank Pass-Through and Monetary Redistribution

Abstract. This paper studies how incomplete pass-through from policy rates to retail deposit and loan rates shapes monetary redistribution. The Italian Survey on Household Income and Wealth (SHIW) data show that low-wealth households are deposit-heavy, mortgage exposure is concentrated in the middle of the wealth distribution, and equity ownership and bank-profit income accrue disproportionately to richer households. I embed deposits, loans, bank profits, and sticky retail rates in a two-asset HANK model calibrated to household portfolios and MPCs. Following a monetary tightening, weak deposit pass-through and stronger loan-rate adjustment redistribute income away from depositors and borrowers toward bank shareholders. Relative to competitive banking, these frictions amplify the increase in wealth inequality and the fall in the bottom-half wealth share. The competitive-banking counterfactual suggests that policies strengthening deposit-market competition and depositor mobility could attenuate the redistribution toward bank shareholders and the resulting increase in wealth inequality.