MPS Core Deposit Index reports enable more accurate estimation of equity at risk IRR, supporting stronger compliance with potentially reduced earnings loss. Existing balances run off data can be directly input into ALM models. The MPS Core Deposit Index Report meets the needs of those institutions that require only benchmark level estimates of core deposit value for regulatory rate shock analysis tests.
The report provides category level premium values and other data for use in calculating equity at risk IRR in Base Case (current interest rates) and for +/-300, +/-200, and +/-100 basis point (bp) rate shock scenarios.
With this MPS service, your institution is empowered to:
- More precisely measure equity at risk IRR, compared to qualitative core deposit values
- Avoid losses in performance that can result from overly conservative core deposit values
- Calculate present values and premiums in your own ALM model
- Gain stronger equity at risk regulatory compliance without increased performance loss
- Enhance ALCO decisions and ALM modeling precision with better core deposit inputs
The institution provides online input for current total balances and rates paid information for up to nine categories of core deposits for Banks/Thrifts (DDA Personal, DDA Business, NOW Personal, NOW Business, Savings Personal, Savings Business, MMDA Personal Low, MMDA Personal High, MMDA Indexed). Credit Unions have six categories available (NIB-Share Drafts, IB-Share Drafts, Regular Shares, MMDA High, MMDA Low, MMDA Indexed). The resulting report produces benchmark quarter end present value, premium, and duration estimates customized to the institution's inputs in Base Case and for +/-300 bp rate shock scenarios. The premium values can be directly used as the institution's equity at risk IRR inputs.
Core deposit retained balances data underlying MPS core deposit index reports is obtained from recent applications of the MPS Advanced Assessment Methodology. This patent pending, advanced econometric approach analyzes historic core deposit behavior in a simultaneous equations system that reflects banking practice and depositor decision influences. It produces high precision forecasts of total balances supplied and rates paid behaviors, plus the category inter-dependencies that characterize deposit supply. It further produces retained balances behavior forecasts, from which the cash flow run off from existing deposit balances can be calculated. These cash flows are used in calculating core deposit present values and premiums.
The core deposit information used in producing MPS core deposit index reports represents billions of dollars of aggregate deposit balances, reflecting the monthly account level decisions of hundreds of thousands of depositors. The data set underlying the MPS Core Deposit Index Service is the broadest available view of micro-level core deposit behavior available today.
How to Obtain MPS Core Deposit Index Service Reports
This service is sold and delivered over the Internet for client convenience. General features of the service's purchase and delivery processes are as follows.
MPS core deposit index reports are available as an annual subscription (4 quarterly or 12 monthly reports) or as single quarter reports. Using a web page order form, the user chooses the term of the contract (annual 4 or 12 report subscription or single report), method of payment (invoice or credit card) and desired user ID and password. Upon confirmation of payment, access to the core deposit index report area of the web site is granted.
The MPS Core Deposit Index Report requires institution input of category specific data on balances and rates paid via a web page input form. Repricing values in the +/-300 bp rate shock scenarios, Net Interest Expense (NIE) and truncation points can be accepted as MPS defaults or overwritten. Once user input is submitted, the report runs in a matter of minutes. An e-mail is sent to the user when the Core Deposit Index Report is available for access on the website. For annual subscriptions, a reminder e-mail is also sent as a prompt to submit the institution's input.
What if a Higher Level of Precision is Needed?
For some institutions, benchmark estimates of equity at risk IRR may not provide a high enough level of precision. This could include larger institutions, and those that fully leverage the behavior and value of their core deposit relationships through higher performance balance sheets.
In such cases, the MPS Deposit Analysis Service can provide the answer. This service delivers institution specific analyses of core deposit behavior and value, produced using the MPS Advanced Assessment Methodology. Deliverables provide core deposit (and CD) behavior and value estimates that are accurate and precise enough to support the business or regulatory applications of any institution.