Back to basics: non-determinant deposits
With the strong trend in banking of mark-to-market risk management, bankers face the difficult task of calculating the market value for non-maturity deposits and credit card loans. Suresh Sankaran, vice-president and director at strategic consulting services firm Fiserv IPS-Sendero, sheds some light on the matter
A substantial portion of the liabilities of major banks consists of non-maturity deposits. Similarly, credit card loans can be a significant part of a typical bank's assets. Common characteristics among all such accounts include:
- no specific maturity
- individual account holders can add or subtract balances as they wish
- the interest rate on these accounts is usually, but not always, a function of open market interest rates
- the balances in aggregate often move in response to changes in open
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