Non-Maturity Deposit Modeling 2019 (A) | GFMI | 7 October 2019 | Downtown Conference Center, 157 William St, New York, NY 10038, USA

For most depository institutions, one of the biggest challenges of risk and profitability management revolves around the treatment of non-maturity deposits (NMDs). Numerous internal models of risk and performance measurement require that the organization establish an explicit view on NMD behaviors. The challenge derives from the fact that principal and interest cash-flows on most NMD products are not governed by contracts or rules, but rather must be assumed. This is usually done through some type of historical time-series analysis. While this historical analysis is a useful starting point for assumption setting, it is insufficient for risk management purposes because it fails to consider the impact of such things as the depository’s unique growth plans, internal governance processes, changes in laws and technology as well as the economic environment in which the firm operates. All of these things can result in potentially material differences in actual deposit behaviors relative to historical experience. When organizations ignore these factors and assume that NMDs are intrinsically valuable, they are prone to generate risk and profitability measures which are incorrect and misleading. As NMDs are generally the primary funding source for most depository institutions, any errors in behavioral assumptions will have a material impact on all downstream risk and balance sheet modeling processes.

Who should attend?
This course is intended to benefit all members of a depository institution’s ALM committee, ALM managers and analysts, FTP managers and analysts, budgeting/forecasting managers and analysts, marketing directors, product profitability managers and product and strategic balance sheet managers.

Key Topics:
• Appreciate how poor NMD modelling approaches potentially distorts the estimation of IRR, LR and profit allocation calculations leaving banks ill-prepared for changes in market interest rates and the price of liquidity
• See a detailed demonstration of a comprehensive NMD model which simultaneously addresses the modelling requirements of IRR, LR and profitability management. This is accomplished through a built-in FTP engine which communicates clearly the value proposition associated with NMDs
• Understand how to address and resolve the challenges of NMD modelling at the analyst, ALM manager and ALCO-member level
• Review practical examples and experiences which highlight the need for comprehensive and well-considered NMD modelling practices; many of the examples highlight weakness with many current modelling approaches
• Learn how poorly-constructed FTP rates on NMDs create performance incentives which may be good for the deposit gatherer but harmful to the bank

2019 Speaker

David Green
Founder, David Green Advisors