Bank Deposit Analysis
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Deposit betas and balance-sheet interest rate risk, measured from FFIEC Call Report filings

US banks report deposit balances and interest expense quarterly. This service derives deposit rates and betas by institution and product for approximately 4,300 filers, prices the reported maturity and repricing schedules for duration and average life, and sets each result against the institution’s FFIEC peer group. It is intended for bank treasurers, ALCO members, and practitioners building or reviewing an ALM model.

Call Report figures are the outside view. Betas and decay rates estimated from your own account-level detail — by product, vintage and customer segment — are materially more precise, and are what an ALM model and its validators require. For help or guidance analyzing your institution’s deposits, email contact@depositanalysis.com.

Deposit betas and decay rates

What is a deposit beta?

A deposit beta is the proportion of a change in market rates that passes through to what an institution pays on a deposit product. A beta of 0.40 indicates that a 100 basis point move in fed funds moves the deposit rate approximately 40 basis points. It is the primary repricing assumption in an ALM model and the principal determinant of how much of a rate move reaches net interest income.

How is a deposit beta estimated?

A quarterly deposit rate — interest expense divided by average balance — is measured against a market rate. Three estimates are reported side by side: a level regression, an error-correction model with a nonlinear (NARDL) specification separating rising from falling rates, and a cycle high-low ratio over the most recent complete fed funds cycle. Standard errors are Newey-West throughout. The three estimates differ, and the difference is informative: an institution that reprices slowly but ultimately fully will show a low regression beta and a high ECM beta, and both are correct.

Is there a representative industry beta?

No industry figure is reliable for modelling purposes. Betas vary materially by product — interest-bearing checking and savings price well below money market and CD accounts — and by institution, since deposit franchises differ in the rate sensitivity of their customers. Betas are therefore measured for a specific institution and product rather than published as an average.

What is a deposit decay rate?

A decay rate is the annual pace at which non-maturity deposit balances run off. It determines the average life assigned to those balances on an interest rate risk schedule. A faster decay rate implies a shorter assumed life and a more liability- sensitive balance sheet; the assumption is as material to the result as the beta.

Should rising and falling betas differ?

Generally yes, and the distinction is material. Deposit pricing is asymmetric: institutions pass hikes and cuts through at different speeds, and the faster direction varies by product. A single symmetric beta understates risk in whichever direction the institution actually reprices faster. The models reported here estimate the two paths separately and test the difference for statistical significance.

Sources

Public FFIEC Call Report filings: Schedule RI for interest expense, Schedule RC-E for deposit balances and the CD maturity ladder, and Schedule RC-K for quarterly average balances — approximately 4,300 filers, quarterly from 2001 — combined with Federal Reserve market rate series from FRED. No proprietary or survey data is used.