Banking on assumptions? How banks model deposit maturities

How do banks manage the behavioural maturity of non-maturing deposits (NMDs)? Using a rich and confidential dataset, we investigate how banks model deposit maturities based on internal assumptions. Although NMDs are contractually floating-rate liabilities with zero maturity, banks reallocate them across different maturity buckets using models that reflect past customer behaviour. Notably, only 20% of NMDs are treated as having zero maturity, while about 10% are assigned maturities beyond seven years. We assess whether these modelling assumptions align with banks’ deposit structures.

Banking on assumptions? How banks model deposit maturities

How do banks manage the behavioural maturity of non-maturing deposits (NMDs)? Using a rich and confidential dataset, we investigate how banks model deposit maturities based on internal assumptions. Although NMDs are contractually floating-rate liabilities with zero maturity, banks reallocate them across different maturity buckets using models that reflect past customer behaviour. Notably, only 20% of NMDs are treated as having zero maturity, while about 10% are assigned maturities beyond seven years. We assess whether these modelling assumptions align with banks’ deposit structures.

Pages

Subscribe to Front page feed