The interest expenses on variable savings are an important driver for a bank’s results. Unlike mortgage interest rates, for instance, there is no knowing when and to what degree the variable savings interest rate will be adjusted. The bank has the right to change this at any time. But how much freedom does the bank really have in this respect?
Savers who place their cash in deposit accounts – and can withdraw the funds from their account at any time – are thus able to decide the liquidity profile of this important source of funding for banks. This is a very important consideration for bank risk managers. In an article about savings in the previous edition of Zanders Magazine, we showed that banks must include adequate modeling of the liquidity maturity as part of their integral liquidity management. But how should this modeling be approached?