Adjustment Policy of Deposit Rates in the Case of Swiss Non-maturing Savings Accounts
Journal
Journal of Applied Finance & Banking
ISSN
1792-6580
ISSN-Digital
1792-6599
Type
journal article
Date Issued
2013-04-04
Author(s)
Abstract
Retail banks usually apply simple linear regression models for describing the dynamics of the deposit rates of non-maturing accounts (NMA) like savings deposits. Thus, typical patterns like asymmetry or rigidity that banks follow when adjusting their deposit rates are ignored. This is insofar surprising, as the asymmetric deposit rate adjustment affects the pricing of embedded options for NMA. In this work we contribute to the elimination of these inconsistencies. Based on data for deposit rates from a representative sample of Swiss banks we provide a strong evidence for both asymmetric adjustment and rigidity pattern. Our proposed modeling approaches reveal that the strategies of Swiss banks to adjust deposit rates are regime dependent. In times of market stress, Swiss banks are tight to market rates; however, in normal regimes this is not observed.
Language
English
Keywords
non-maturing accounts
deposit rates
asymmetries
rigidity;
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Scienpress
Publisher place
London UK
Volume
3
Number
3
Start page
271
End page
323
Pages
53
Subject(s)
Eprints ID
218622
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