The Impact Of interest Rate Changes on Non-Maturity Deposits(NMDs) in the Banking sector.

Mouhamed Vame Cisse

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.FINANCE

Faculty Research Mentor: Li, Georges  

Abstract:

: Non-maturity deposits (NMDs) – such as checking, savings, and money market accounts – are bank liabilities with no contractual maturity, yet they often behave like long-term funding because customer withdrawals are typically infrequent. NMDs are prized for their stability and low cost, but their behavioral maturity (or effective duration) depends on customer stickiness and interest-rate sensitivity. This report reviews the literature on NMD modelling, describes Bank of America’s NMD structure, and develops a statistical model using public data to forecast NMD balances. We examine how deposit volumes evolve in response to interest rates and macro conditions, discuss model calibration and validation, and analyze the implications for interest-rate risk and deposit “stickiness.” Finally, we suggest model extensions and acknowledge limitations for further research.Non‑maturity deposits (NMDs) – e.g. checking savings and money market accounts – have no contractual maturity and thus pose modeling challenges. Banks like Bank Of America must segment their NMD base (e.g. by account type, depositor type, “core” vs “surge”) and assign assumptions for how quickly balances run off and how deposit rates respond to market rates. For example, risk models use assumed decay rates (annualized attrition percentages) and deposit betas.