We investigate households’ bank switching exploiting a unique representative dataset from Bank of Italy Survey on Household Income and Wealth that follows the households and their bank(s) over time. First, we document that bank switching is quite prevalent in our sample, with almost a quarter of households changing their main bank in a biannual horizon. Next, we relate the decision to switch to the features and dynamics of household bank relationship, and to the characteristics of both households and banks. In line with the switching cost theory, we find that using more than a single bank, as well as the intensity (number of services used), and the scope (bank services used) of the relationship with the main bank play a role in shaping the households’ decision to switch. Moreover, bank switching is strongly and positively correlated with both taking out and having paid off a mortgage.

We investigate the role of mortgage switching costs in shaping the households’ decision to change their main bank. To this end, we use a unique panel dataset that enables us to infer household's bank switching, in conjunction with a legal reform that exogenously slashed down the mortgage switching costs. The empirical evidence, which survives to a variety of robustness checks, supports the hypothesis that the explicit switching costs in the retail banking market are a weighty factor in shaping households’ bank switching, despite any potential “informational lock-in”. Dissecting the results, we show that the effects of the reform were not uniform across households. The more educated households, those with a longer or broader relationship with their previous bank and those residing in ex-ante less competitive banking markets were at the forefront of the wave of bank switching.