Estimating maturity profiles of nonmaturing deposits

Fidelis Musakwa and Eric Schaling

Journal of Risk

Abstract: Understanding the maturity profiles of nonmaturing deposits is vital to assess a bank’s funding liquidity risk and interest rate risk. Estimating these maturity profiles is, however, difficult because banks experience regular cash inflows and outflows on nonmaturing deposit accounts. As a result, it is hard to ascertain the time origin of each dollar deposit constituting the total outstanding balance of a portfolio of non-maturing deposit accounts. To overcome this challenge, we propose a new method to convert account balance data into deposit lifetime data amenable to survival analysis. This provides a way to infer a nonmaturing product’s maturity profile from a survival model. We demonstrate how the estimated maturity profile can be employed to project the runoff of outstanding balances on nonmaturing deposits. The model is illustrated with a case study on a retail bank savings product in a South African bank in the 1999–2016 period. Our case study results suggest that the proposed model is well suited to estimating the maturity profile of nonmaturing deposits.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-risk/6855676/estim ... nonmaturing-deposits (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ4:6855676

Access Statistics for this article

More articles in Journal of Risk from Journal of Risk
Bibliographic data for series maintained by Thomas Paine ().