Results for ‘nmd’
Calibrating deposit models: Using historical data or forward-looking information?
After a long period of negative policy rates within Europe, the past two years marked a period with multiple hikes of the overnight rate by central banks in Europe, such as the European Central Bank (ECB), in an effort to combat the high inflation levels in Europe. These increases led…
Read moreEuropean committee accepts NII SOT while EBA published its roadmap for IRRBB
The European Committee (EC) has approved the regulatory technical standards (RTS) that include the specification of the Net Interest Income (NII) Supervisory Outlier Test (SOT). The SOT limit for the decrease in NII is set at 5% of Tier 1 capital. Since the three-month scrutiny period has ended it is expected that…
Read moreWhy developing a non-maturing deposit model should be the top priority for banks in the Nordics
First and foremost, the long period of low and even negative swap rates was followed by strongly rising rates and a volatile market, which impacted the behavior of both customers and banks themselves. At the same time, regulatory developments, initiated by EBA’s new IRRBB guidelines, have shifted the banks’ focus…
Read moreSavings modelling series: The impact of savings rate floors on balance sheet management
The low or even negative market rates in many Western European countries significantly affect banks’ pricing and funding strategy. Many banks hesitate to offer negative rates on non-maturing deposits (NMD) to retail customers. In some markets, like in Belgium, regulatory restrictions impose a lower limit on the savings rate that…
Read moreSavings modelling series – How ‘hidden savings’ impact the risk profile for banks
WHAT ARE HIDDEN SAVINGS? Because the low or zero rates offered by banks provide little motivation to move money to savings accounts, many banking customers use their current accounts as savings account. It is very likely that customers will move part of this money to savings accounts when rates increase…
Read moreSavings modelling series: Non-maturing deposits model concepts
Are you interested in a more in-depth comparison of deposit modeling concepts? Click here. For banks with significant non-maturing deposits portfolios, Risk Management functions need to have a robust behavioural risk model. This model is required for Interest Rate Risk in the Banking Book reporting, hedge, stress testing, risk transfer, and…
Read moreSavings modelling series – How to determine core non-maturing deposit volume?
Identifying the core of non-maturing deposits has become increasingly important for European banking Risk and ALM managers. This is especially true for retail banks whose funding mostly comprises deposits. The last years, the concept of core deposits was formalized by the Basel Committee and included in various regulatory standards. European…
Read moreSavings modelling series – Calibrating models: historical data or scenario analysis?
One of the puzzles for Risk and ALM managers at banks the last years has been determining the interest rate risk profile of non-maturing deposits. Banks need to substantiate modelling choices and parametrization of the deposit models to both internal and external validation and regulatory bodies. Traditionally, banks used historically…
Read moreEBA published final package of IRRBB/CSRBB guidelines
On 20 October 2022, the European Banking Authority (EBA) published the final package of guidelines for the management of Interest Rate Risk in the Banking Book (IRRBB) and the Credit Spread Risk in the Banking Book (CSRBB). The package includes: Final guidelines for IRRBB and CSRBB (link)i Regulatory Technical Standards…
Read moreThe EBA expects banks to expand their CSRBB framework
The current version of the IRRBB Guidelines, published in 2018, came into force on 30 June 2019. At that time, the IRRBB Guidelines were aligned with the Standards on interest rate risk in the banking book, published by the Basel Committee on Banking Supervision (in short, the BCBS Standards) in…
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