One of the most relevant issues involving the funding side of your balance sheet is determining how to effectively deploy non-maturity deposits, or deposit accounts with no stated maturity, to fund assets by roughly matching holdings on both sides of the balance sheet.
Yes, I’m aware that non-maturity deposits are already being used to fund the asset side of the balance sheet. But if funding management is aimed at funding the asset side of the balance sheet with liabilities with similar interest rate risk characteristics at the lowest funding cost, then we need to determine which assets non-maturity deposits can effectively support. This issue has grown in importance in recent years as non-maturity deposits now represent 60 percent to 80 percent of deposit funding in many institutions.
The first step in this exercise is to complete a core deposit study. Out of that study come pricing betas to help estimate how market rate changes will affect credit union rates, decay rates and surge balance estimates of the potential for sudden changes in deposits for your non-maturity deposits. Then you plug these assumptions into your asset-liability model.
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