Deposit Betas
Table of Contents
1. Deposits
Banks accept deposits (into savings and checking accounts) and use those deposits to fund loans such as mortgages. Deposits are a liability for the bank and the bank pays the floating deposit rate. The loans are assets to the bank, and often they pay a fixed rate.
Banks generally pay deposit rates which are below market short-term interest rates. Therefore banks rely on their deposit franchise for inexpensive funding.
2. Deposit Beta
The Beta of the deposits means the sensitivity of deposit rates to short-term interest rate changes (often the Federal Funds rate).
Beta: the change in deposit rates given a change in short-term interest rates.
2.1. NYU Dataset
Researchers at NYU provide a dataset with the deposit beta for each bank. We can download this data with:
import pandas as pd
import ssl ssl._create_default_https_context = ssl._create_unverified_context
beta_url = "https://pages.stern.nyu.edu/~pschnabl/data/DSS_depositBeta.xlsx" betas = pd.read_excel(beta_url)
betas
name rssdid cert rankpctile assets_cpi assets_2022q4 expbeta depexpbeta
0 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION 852218 628 100 455048214 3.201942e+09 0.529824 0.468395
1 BANK OF AMERICA, NATIONAL ASSOCIATION 480228 3510 100 383877448 2.418508e+09 0.483014 0.408315
2 CITIBANK, N.A. 476810 7213 100 341539080 1.766752e+09 0.355254 0.505239
3 WELLS FARGO BANK, NATIONAL ASSOCIATION 451965 3511 100 275674516 1.717531e+09 0.426680 0.358985
4 U.S. BANK NATIONAL ASSOCIATION 504713 6548 100 85843162 5.851356e+08 0.442134 0.490802
... ... ... ... ... ... ... ... ...
11660 HUBBELL BK 438854 18796 1 2558 NaN 0.177984 0.237814
11661 FARMERS ST BK OF YPSILANTI 250252 10240 1 2469 NaN 0.094323 0.044873
11662 BANK CENTRAL 303055 11774 1 2284 NaN 0.370872 0.446175
11663 PLATTE CTR BK 670850 16234 1 2126 NaN 0.280005 0.273295
11664 STATE BK OF LIBERTY 16056 16324 1 1592 NaN 0.265194 0.446431
[11665 rows x 8 columns]
betas.to_csv("betas.csv")