Non-Maturing Deposits ~ Further Thoughts
Non-Maturing Deposit Analysis
Further Thoughts on Assessing the Management of Non-Maturing Deposits
During periods of change in Monetary Policy it is always wise to reassess where we have come from, where we are, and where we think we are going. It is important to ascertain that our performance, and our anticipated performance, conform to our expectations and to those of our Board and our Regulators. To the extent that there are differences, we may be required to either change direction or be prepared for some constructive conversations.
Just as E=MC2 was able to encapsulate nearly the entire universe of truths for Einstein, the simple equation below has encapsulated what has typically represented the essence of the dynamics of banking:
Volume X Rate X Time
Up until the past 25 - 30 years, virtually every element of a bank's Balance Sheet could be discussed in terms of quantifying each of these items for a particular financial instrument. Unlike a typical algebraic equation where we might be comfortable dealing with one or more unknowns, in this financial equation all three variables must typically be known with a relatively high degree of certainty.
With the re-introduction of Interest Bearing Checking Accounts in the late 1980's and early 1990's, after being prohibited in the 1930's, that certainty, or at least approximation, went "out of the window," so to speak. The reason? There are many...
Click here to read more: CE01_Exec_Advisory_XVII-A_Non-Maturing_Deposits_0317_BANK.pdf