Subscriptions : Core Deposit Indexes

MPS now has 2 core deposit index solutions!

The MPS Core Deposit Intangibles Index is a direct, but enhanced, replacement for OTS IRR model inputs.  Intangible values are derived from national averages of MPS institution specific statistical analyses of core deposit behavior. Intangible values are generated for an array of rates paid ranges, by rate shock scenario.  No extra report input is needed. They can be directly applied as override values in ALM models or as entries into spreadsheet reports.  To calculate present values from the intangible ratios, multiply (1-premium percent) times the current book balance. Varying average lives are provided to allow institution matching and assist in sensitivity testing.

The MPS Custom Core Deposit Index allows for customization of national index behaviors with input of institution specific values such as balances and rates paid.  Average lives, premiums, and effective duration values are presented by category.  Time period and scenario specific runoff/decay data are provided as direct IRR model inputs.  

The reports provide category level values and other data for use in calculating equity at risk in Base Case (current interest rates) and for +500, +400, +/-300, +/-200, and +/-100 basis point (bp) rate shock scenarios behavior.  Separate tables are available for banks/thrifts (9 categories) and credit unions (6 categories).

Bank/Thrift categories: DDA Personal, DDA Business, NOW Personal, NOW Business, Savings Personal, Savings Business, MMDA Personal Low, MMDA Personal High, MMDA Indexed.

Credit Union categories: NIB (Non-interest bearing)-Share Drafts, IB-Share Drafts, Regular Shares, MMDA High, MMDA Low, MMDA Indexed.

Over 150 banks and thrifts, and over 75 credit unions, are represented in the national index experience bases across the US.

MPS core deposit index reports enable more accurate estimation of equity at risk, supporting stronger compliance with potentially reduced earnings loss. Existing balances run off data can be directly input into ALM models.  MPS Core Deposit Indexes meet the needs of those institutions that require only benchmark level estimates of core deposit value for regulatory rate shock analysis tests.

With this MPS service, your institution is empowered to:

  • More precisely measure equity at risk, 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

Core deposit retained balances data underlying MPS core deposit index reports is obtained from recent applications of the MPS Advanced Assessment Methodology. This patented, 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 MPS core deposit index reports 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 via the MPS website for client convenience. MPS core deposit index reports are available as an annual subscription (4 quarterly reports) or as single quarter reports. Using a web page order form, the user chooses the term of the contract (annual 4 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 Intangibles Index Report requires no input.  When the new quarter information is available (typically 5-7 business days from quarter end), an e-mail is sent notifying the user that the Report is available for access on the MPS website.

    The MPS Custom 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, +400 and +500 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.  When new quarter data is available, again an e-mail is sent to the user with a reminder to submit the institution's input.

What if a Higher Level of Precision is Needed?

For some institutions, benchmark estimates of equity at risk 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.  Recent regulatory guidance suggests that institution specific core deposit inputs are required.

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.