IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v18y2025i2p84-d1583835.html
   My bibliography  Save this article

Non-Maturing Deposits: Predictive Modelling and Risk Management

Author

Listed:
  • Anton van Dyk

    (Riskworx (Pty) Ltd., 138 West St, Sandton 2031, South Africa)

Abstract

Non-maturing deposits (NMDs) are a significant source of liquidity for banks, making research into their modelling and forecasting invaluable. However, NMDs have no explicit expiration date, posing liquidity risks and complicating management. This research develops models and a framework to explain, predict, and manage variations in non-maturing deposits. Aggregate savings and transaction deposit data from an African bank were analysed to test the methodologies. The Trend-Fourier model, leveraging historical trends and Fourier analysis, forecasted 90-day deposit volumes. The model revealed prominent cyclicalities and monthly trends in deposit account volumes. Benchmarking showed high accuracy for savings deposit volumes, while transaction deposit volumes were less accurate, suggesting simpler models might be suitable. Additionally, a risk metric called LVaR (Liquidity Value at Risk) was proposed. Two approaches for calculating the LVaR were tested. An exceedance test demonstrated notable accuracy for savings deposit volumes but struggled with transaction deposits. Results indicated savings deposit volumes were more predictable than transaction deposits. These findings could enhance banks’ balance sheet management by improving non-maturing deposit forecasting. The proposed methodologies could be utilized for internal and regulatory purposes, such as calculating the liquidity coverage ratio under Basel regulations.

Suggested Citation

  • Anton van Dyk, 2025. "Non-Maturing Deposits: Predictive Modelling and Risk Management," JRFM, MDPI, vol. 18(2), pages 1-22, February.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:2:p:84-:d:1583835
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/18/2/84/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/18/2/84/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jarrow, Robert A. & van Deventer, Donald R., 1998. "The arbitrage-free valuation and hedging of demand deposits and credit card loans," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 249-272, March.
    2. Kalkbrener, Michael & Willing, Jan, 2004. "Risk management of non-maturing liabilities," Journal of Banking & Finance, Elsevier, vol. 28(7), pages 1547-1568, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliver Entrop & Marco Wilkens & Alexander Zeisler, 2009. "Quantifying the Interest Rate Risk of Banks: Assumptions Do Matter," European Financial Management, European Financial Management Association, vol. 15(5), pages 1001-1018, November.
    2. Alexandre Adam & Hamza Cherrat & Mohamed Houkari & Jean-Paul Laurent & Jean-Luc Prigent, 2022. "On the risk management of demand deposits: quadratic hedging of interest rate margins," Annals of Operations Research, Springer, vol. 313(2), pages 1319-1355, June.
    3. Hamza Cherrat & Jean-Luc Prigent, 2023. "On the Hedging of Interest Rate Margins on Bank Demand Deposits," Computational Economics, Springer;Society for Computational Economics, vol. 62(3), pages 935-967, October.
    4. Bats, Joost V. & Giuliodori, Massimo & Houben, Aerdt C.F.J., 2023. "Monetary policy effects in times of negative interest rates: What do bank stock prices tell us?," Journal of Financial Intermediation, Elsevier, vol. 53(C).
    5. Florentina Paraschiv, 2013. "Adjustment Policy of Deposit Rates in the Case of Swiss Non-maturing Savings Accounts," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(3), pages 1-19.
    6. Blöchlinger, Andreas, 2015. "Identifying, valuing and hedging of embedded options in non-maturity deposits," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 34-51.
    7. Konstantijn Maes & Thierry Timmermans, 2005. "Measuring the interest rate risk of Belgian regulated savings deposits," Financial Stability Review, National Bank of Belgium, vol. 3(1), pages 137-151, June.
    8. Azzone, Michele & Barucci, Emilio, 2023. "Evaluation of sight deposits and central bank digital currency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    9. Marie-Paule Laurent, 2004. "Non-maturity deposits with a fidelity premium," Working Papers CEB 04-016.RS, ULB -- Universite Libre de Bruxelles.
    10. Marina Marena & Andrea Romeo & Patrizia Semeraro, 2022. "Non-maturing deposits modelling in a Ornstein-Uhlenbeck framework," Papers 2209.13314, arXiv.org.
    11. Blöchlinger, Andreas, 2021. "Interest rate risk in the banking book: A closed-form solution for non-maturity deposits," Journal of Banking & Finance, Elsevier, vol. 125(C).
    12. John Ashton & Andros Gregoriou & Jerome V. Healy, 2013. "The relative influence of price and choice factors on retail deposit quantities," Working Papers 13006, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    13. Sven Balder & Wolf Christoph Gramatke & Antje Mahayni & Gordon Müller-Seitz & Jörg Sydow, 2014. "Bewertung von Kündigungsrechten in der privaten Wohnungsbaufinanzierung — Über den separaten Ausweis von Margen- und Kursschäden," Schmalenbach Journal of Business Research, Springer, vol. 66(1), pages 3-36, February.
    14. Nyström, Kaj, 2008. "On deposit volumes and the valuation of non-maturing liabilities," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 709-756, March.
    15. Hans Dewachter & Marco Lyrio & Konstantijn Maes, 2006. "A multi-factor model for the valuation and risk managment of demand deposits," Working Paper Research 83, National Bank of Belgium.
    16. Ahmadian , Azam & Shahchera , Mahshid, 2014. "A Model of Asset and Liability Management and Monetary Shocks (DSGE Model)," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 9(1), pages 57-91, October.
    17. Chuang-Chang Chang & Ruey-Jenn Ho & Chengfew Lee, 2010. "Pricing credit card loans with default risks: a discrete-time approach," Review of Quantitative Finance and Accounting, Springer, vol. 34(4), pages 413-438, May.
    18. Areski Cousin & Ying Jiao & Christian Yann Robert & Olivier David Zerbib, 2022. "Optimal Asset Allocation Subject to Withdrawal Risk and Solvency Constraints," Risks, MDPI, vol. 10(1), pages 1-28, January.
    19. Entrop, Oliver & Scholz, Hendrik & Wilkens, Marco, 2009. "The price-setting behavior of banks: An analysis of open-end leverage certificates on the German market," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 874-882, May.
    20. repec:zbw:bofrdp:2009_027 is not listed on IDEAS
    21. Peter Hoffmann & Sam Langfield & Federico Pierobon & Guillaume Vuillemey, 2019. "Who Bears Interest Rate Risk?," The Review of Financial Studies, Society for Financial Studies, vol. 32(8), pages 2921-2954.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:18:y:2025:i:2:p:84-:d:1583835. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.