Originally published on LinkedIn
The 2022-2023 rate cycle taught the banking industry an expensive lesson about deposit betas. This analysis examines why actual deposit cost sensitivity far exceeded forecasts and provides a framework for improving future predictions.
Key Topics:
- Understanding deposit beta fundamentals and measurement
- Why banks systematically underestimated deposit betas (20-30% forecasts vs. 50-60% reality)
- The role of digital banking, competitive dynamics, and customer sophistication
- Practical approaches to improving deposit beta forecasting
- Implications for balance sheet planning and NIM management