Journal of Risk

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Estimating maturity profiles of nonmaturing deposits

Fidelis Musakwa and Eric Schaling

  • We propose a new method to convert non-maturing deposit account balances into deposit lifetime data amenable to survival analysis.
  • This provides a theoretically sound way to infer a non-maturing 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 non-maturing deposits.
  • Case study results suggest that the proposed model is well suited to estimating the maturity profile of non-maturing deposits.

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.

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