Non-Maturity Deposit Modeling Webinar December 2023
I am excited to announce our upcoming webinar on Non-Maturity Deposit (NMD) Modeling. Join me to discover the merits of my innovative approach to modeling NMDs in which the the treatment of behavioral cashflows is synchronized across risk and profitability domains. By incorporating the calculation of FTP rates directly in the model, the spread forecasting and reconciliation process ensures that deposit spreads have a consistent meaning across the bank, especially during periods of economic volatility.
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The webinar will be delivered in four parts, from 09:30-1:00pm EST on December 4th, 5th, 7th & 8th, 2023.
Will History Repeat Itself?
Now that rates have risen over 500 bps in many markets, we have current empirical evidence which can be used to estimate rate betas, decay functions and balance volatility. It has been more than 15 years since we have experienced such a rate move. As recently as early 2022, we had to rely on this past data for our best estimates of these behavioral components. While the 2004-6 experience was certainly relevant in terms of the magnitude of the rate move, the extraordinary Covid-related liquidity injected into the banking system has provided a buffer against the competitive pressures which rapidly destroyed deposit duration in the previous cycle.
Even so, the obsession with balance sheet growth, persistent flaws in product-level margin estimates and a failure to appreciate the liquidity dynamics of large-balance accounts has already resulted in the failure of several institutions. While these failures occurred several months ago, it is not certain that we are out of the woods yet – the Fed is still contending with persistent inflation and it continues to shrink the level of reserves in the banking system; higher interest rates and fewer deposits will certainly create challenging headwinds for bank profitability.
How well does your bank manage the challenge of forecasting and managing NMD behaviors?
Engaging David to help build a deposit model for our institution was one of the best decisions I’ve had the privilege of making as an ALM/FTP Manager. The model serves with an openness that elevates strategic conversations with line of business leaders and executive management, while it also provides the economic integrity ALCO requires to make prudent risk management decisions.
Brian Gilbert, CFA, Treasurer, Pinnacle Financial Partners
Deposit Modeling Software Demonstration
In addition to providing a discussion of techniques for modeling key behavioral attributes of NMDs and their role in estimating various measures of interest rate risk (IRR) and liquidity risk (IRR), Empyrean Solutions will provide a demonstration of their Deposit Analytics software. Deposit Analytics is a market-leading, user-managed solution for analyzing historical customer-level data to produce re-pricing and liquidity cash flow schedules for use in asset-liability management (ALM) and funds transfer pricing (FTP) models. Deposit Analytics is unique in the deposit modeling space for its intrinsic back-testing capabilities as well as its consideration of the calculation of FTP rates.
We look forward to seeing you in the Non-Maturity Deposit (NMD) Modeling webinar.
Click here for registration information.
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