Reimagining non-maturity deposits modelling

In today’s volatile interest rate environment, non-maturity deposits (NMDs) have emerged as a critical focus area for banks managing interest rate risk in the banking book (IRRBB). As depositor behavior becomes increasingly unpredictable, traditional modeling approaches are no longer sufficient.

KPMG’s latest thought leadership explores how banks can reimagine their NMD modeling frameworks to meet evolving regulatory expectations and enhance strategic risk management.

NMDs are inherently sensitive to rate changes, making them a key driver of interest rate risk. With depositor behavior shifting rapidly in response to market dynamics, banks must adopt more sophisticated modeling techniques to understand and anticipate these changes.

Accurate NMD modeling is not just a regulatory requirement - it’s a strategic imperative. It enables banks to optimise hedging strategies, ensure balance sheet resilience, and align risk management with real-time economic conditions.

Effective NMD modelling demands more than technical precision. Banks must address systemic challenges such as fragmented data, inconsistent quality, and legacy model architectures. Our methodology integrates behavioural analytics, regulatory alignment, and scalable design to overcome these hurdles.

Our approach supports both first and second line teams, enhancing risk oversight and enabling forward-looking decision-making.

We offer a market-leading, end-to-end service for NMD model development:

• Step 1: Assess
  Evaluate your model’s positioning using industry insights and benchmarking.
• Step 2: Define
  Tailor your model to your business context, ensuring proportionality and regulatory alignment.
• Step 3: Develop
  Build production-ready, documented models that are maintainable and compliant.
• Step 4: Deploy
  Integrate models across operational and governance layers to support risk reporting.

KPMG’s insights are informed by a pan-European survey of 93 banks, including 11 from non-Eurozone EU countries. Over half of the participants are directly supervised by the European Central Bank. This breadth of input ensures our recommendations are grounded in real-world practices and regulatory realities.

Whether you need full model development or targeted validation, KPMG offers tailored solutions to meet your needs:

• Model development: Redesigning NMD models with client clustering, liquidity integration, and expert judgement governance.
• Model validation: Establishing robust validation frameworks with volume forecasting, sensitivity testing, and supervisory insights.
• Gap assessment & assurance: Reviewing IRRBB and CSRBB frameworks, delivering actionable recommendations and capital impact insights.
• EVE/NII & SOT reviews: Supporting remediation of high-impact findings and ensuring readiness across governance and modelling.

KPMG’s proven credentials in financial risk management are backed by deep regulatory fluency and behavioural insight. Our team is ready to help you navigate the complexities of IRRBB and build models that are not only compliant but strategically aligned.