The Changing Liability Structure of Savings and Loan Associations

The paper surveys the key factors, past and future, affecting Savings and Loan Association liability structure. The economic principles underlying Savings and Loan liability management are illustrated with emphasis on the dynamic aspects of decision‐making and on the lack of perfect competition within the industry. Specific topics include the matching of asset and liability maturities, liquidity management, discrimination among classes of liabilities, and Regulation Q ceilings. The major shifts in the liability structure of Savings and Loan Associations during the 1970s is then reviewed. Key points include the steadily declining share of passbook accounts, the increasing average maturity of liabilities until 1978, and the ramifications of newly introduced deposit categories such as Money Market Certificates. Finally, the likely liability structure of Savings and Loans during the 1980s is discussed in the context of the removal of Regulation Q ceilings. The necessity for Savings and Loans to offer competitive interest rates on all maturity categories, and to offer deposit liabilities with liquidity features comparable to those available from other sources is emphasized.