Bank deposits and textual sentiment: When an European Central Bank president's speech is not just a speech

Abstract

We investigate whether the textual sentiment affects European depositors' behavior in withdrawing their deposits. We construct two textual sentiments able to capture the perceived uncertainty. Our findings suggest that a high frequency of uncertainty and weak modal words in the European Central Bank (ECB) president's monthly speeches leads both households and non-financial corporations to withdraw their bank deposits. We also find that non-financial corporations' deposits are more sensitive than households' deposits to these textual sentiments. These findings suggest that regulators and policymakers could expand the already existing early-warning systems for the banking sector by considering the frequency of uncertainty and weak modal words in the ECB president's speeches.