Deposits Dynamism to Dominate Bank Treasurers’ Dialogue
Tags: BankTPG 2018 Annual Meeting, Betas, deposit dynamism, models, Morgan Stanley, regulatory reform
US regional bank treasurers face a new world with deposits as rates continue to rise.
While the ability of President Trump and a Republican Congress to move the needle further on bank regulatory reform before the midterm elections remains in focus, the dominant topic for exchange at our Bank Treasurers’ Peer Group 14th Annual Meeting on May 9-11 in New York will be what’s being called “deposit dynamism.”
Beyond betas. For the last several years, the focus of our deposit discussions has been on betas, which are just one element of modeling deposit behavior. The topic remains important, as the Fed signals more rate raising under a new Fed Chair who may hold press conferences after every meeting (meaning, perhaps, more opportunities to discuss fed-funds rate increases). However, deposit balance sensitivity to interest rates (betas) is not the only area of interest today. Banks are trying to look at deposit modeling and analysis more holistically, since there are more dynamics at play, as indicated by the fact that depositors have not churned as beta models have predicted—at least, so far.
Reflecting new market dynamics. “Deposit dynamism” as one member put it, entails modeling deposits to look at flows based on pricing or environment changes as well as rate sensitivity. We are in uncharted territory regarding monetary policy, which is just one new market dynamic; and with rising competition from new players for deposits and competing “funds,” it’s time to take a broader look.
What models are being used? Accordingly, we will compare the models larger banks tend to use that are developed in-house with vendor-provided solutions. Novantas has been invited to share insight, including on some of the models it has developed.
What a deposit review tells us. Next, we will assess the deposit review process, using a member example of a project undertaken with EY, to determine what inputs and outputs are most relevant for a given institution. We also will discuss where in the organization deposit modeling is done and the level of satisfaction: great, average, lousy?
Morgan Stanley, returning as annual meeting sponsor, will provide added insight, too, including analysis by its Chief US Economist Ellen Zentner on the direction of rates, the latest views from the firm’s bank analysts on what’s driving bank value and what questions banks should be prepared to answer. Members of Morgan Stanley’s treasury staff will also be on hand over the course of the meeting, as in past years, to participate in the exchange with member treasurers. Catch up on everything you missed from the last meeting here.
We look forward to connecting with our regional treasurers to exchange knowledge on making deposit modeling and analysis more dynamic, as well as other topics—and to distilling that knowledge into insight that everyone can use to succeed.
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