Product Analytics
Behavior assumptions and forecasts for non-maturity deposits, time deposits and loan prepayments are critical inputs for accurate risk measurement and effective balance sheet management. VBC offers a comprehensive suite of deposit and loan behavior analysis services that are both flexible and customizable in order to best meet your specific objectives, available data and budgets.
Whether your goals are to improve the quality and accuracy of ALM model inputs for regulatory compliance, to better understand potential concentration exposures within your deposit portfolio or to deploy fully segmented forecasts to support vintage, geographic or affiliate-based analyses, VBC will partner with you to deliver the most robust deposit behavior forecasts possible.
All VBC deposit and loan studies utilize industry-leading analytics and are fully transparent back to the underlying data. Relationships between deposit and loan behaviors and interest rates or other economic and market conditions are clearly identified with vendor-imposed assumptions and constraints kept to a minimum and always fully disclosed.
Non-Maturity Deposit Studies
VBC offers a comprehensive suite of deposit analytic offerings, designed to be both flexible and customizable to your institution’s needs. Our deposit studies utilize industry-leading analytics to ascertain relationships between deposit behaviors and interest rate changes to ensure your institution is effectively managing interest rate risk. They are designed to be transparent, understandable, and well-documented in order to avoid the use of any black box modeling approaches
Non-maturity deposit (NMD) forecasts are critical data inputs in asset-liability management (ALM) and interest rate risk (IRR) modeling processes and are the most significant source of funding for financial institutions. Understanding how deposit pricing decisions respond to changes in interest rates and how depositor behaviors react to those changes, either through attrition or balance changes, is key to managing interest rate risk.
VBC’s NMD studies can be used directly in your institution’s ALM model, or they can be used as a cost-effective complement to your current NMD forecasts for benchmarking purposes. Benchmarking can increase confidence in your existing ALM inputs by confirming the direction and magnitude of repricing and retention behaviors through an independent third-party assessment.
VBC’s Essentials package relies on data-driven insights and predictive analytics to generate statistically-driven beta and decay rate assumptions for each NMD segment seen on your institution’s balance sheet. These data-driven insights are segmented on the account level, allowing for robust and segment-specific forecast outputs under various interest rate shock scenarios.
Non-Maturity Deposit Analysis Benchmarking
Our non-maturity deposit analysis benchmarking service provides a cost-effective complement to your current NMD forecasts. Benchmark results can increase confidence in your existing ALM inputs by confirming the direction and magnitude of repricing and retention behaviors through an independent third-party assessment as well as offer additional perspective on behavior sensitivities across a range of interest rate environments not captured in your internal analyses.
Loan Prepayment Studies
VBC’s loan prepayment model is designed to give your institution insight into the prepayment behaviors seen within your institution. The model’s outputs can be used in multiple modeling processes, including asset-liability management (ALM) or interest rate risk (IRR) models as well as credit risk models such as Current Expected Credit Losses (CECL). Our team guides clients in developing use-case appropriate models to ensure all data nuances, such as acquisitions, are appropriately accounted for in the model outputs.
Developed using your institution’s historical data and meaningful segmentation, our models give senior leaders insight into the prepayment behavior of different groups of customers seen within your institution’s portfolio. During each engagement, VBC facilitates effective challenge during the development process, documents the development decisions and rationale, and is available to present and discuss assumptions with committees or senior leaders.
VBC’s Loan Prepayment Model relies on data-driven insights to generate a historical time series of prepayment speeds for each applicable loan segment within your institution’s portfolio. At its core, the model captures all prepayments that occur in the form of complete loan payoffs. However, this model can be used in conjunction with VBC’s Curtailment Model to capture prepayments that come in the form of intermittent extra payments towards the loan principal, if desired.
For ALM modeling purposes, VBC expands the prepayment study to generate statistically-driven prepayment speed forecasts under various interest rate shock scenarios. All results are provided in a wide range of formats to align with your institution’s ALM model integration.
Time Deposit Behavior Analysis
Time deposits, such as CD’s or share certificates are another important component of balance sheet funding. While contractual maturities are known for these deposits, early withdrawals need to be considered, particularly if penalties are minimal. Understanding the magnitude of new volume pricing practices relative to market rate changes is critical to ensuring accurate new volume rate forecasts in ALM modeling.
A VBC time deposit study is fully customizable and can be oriented to focus only on the pricing or early withdrawal dimension or expanded to include both. When paired with a VBC Non-Maturity Deposit Study, cross-product relationships are explored to identify and quantify the magnitude of deposit transfers from time to non-maturity and vice versa.
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