Core deposits
Definition
Under the Basel framework (BCBS d368), core deposits are the proportion of stable non-maturity deposits (NMDs) that are unlikely to reprice even under significant changes in the interest rate environment. The concept combines two dimensions of stickiness: volume stability (the balance is unlikely to be withdrawn) and rate stability (the deposit rate is unlikely to move materially with market rates).
What This Actually Means
The slice of your non-maturity deposits that behaves like long-term fixed funding: it stays put and its rate barely moves when market rates do. That stickiness is what lets you behaviouralise the balance over a longer maturity and hedge it.
Two things have to be true at once. The balance has to be stable (the money doesn't leave) and the rate has to be stable (you don't have to pass rate rises through to keep it). A balance that stays but reprices fully isn't core; neither is a cheap balance that walks the moment a competitor pays more.
Where It Matters
Definition (BCBS d368). Banks first split each NMD category into stable and non-stable portions based on observed volume changes over the past 10 years. Within the stable portion, the subset unlikely to reprice under significant rate changes is core; the rest is non-core. Non-core deposits are treated as overnight and slotted into the shortest time bucket. Core deposits are slotted across longer buckets up to a maximum average maturity, where one is prescribed.
Estimation is left to the bank. Basel doesn't prescribe how to identify core within the stable portion. Common approaches lean on deposit rate sensitivity (beta) and how balances behave under rate stress, drawing on historical observation, a forward view of pricing strategy, or both. A common shortcut approximates core volume as stable x (1 - beta). That's a practitioner rule of thumb, not a defined method — and the choice of approach, including how much weight sits on the historical versus forward components of beta, is itself a modelling assumption that needs documenting and validating.
Two uses, two volumes. Core deposit volume does two related but distinct jobs. The first is risk measurement: it sets the volume behaviouralised in IRRBB metrics, assigning longer effective repricing maturities to core balances in EVE, repricing gap reports and earnings sensitivity. The second is structural hedging and transfer pricing: it sizes the term volume ALM hedges (typically with fixed-rate swaps or investments) and that is transfer-priced at a longer-dated rate back to the originating business, locking in a structural margin. The volume used for each can differ — regulatory IRRBB measurement is subject to any applicable jurisdictional cap, while internal hedging and FTP use the bank's modelled core volume, which may sit above or below the regulatory ceiling.
Caps vary by regime and approach. Limits on the proportion of NMDs treated as core and the maturity assigned to them are not universal — they differ by jurisdiction, by whether the bank uses the standardised approach or its internal measurement system (IMS), and by which deposit categories are in scope. BCBS d368 places caps in the standardised framework only (a category-level cap on the proportion designated as core, and a separate cap on the average maturity of that core); IMS approaches under BCBS are principles-based with no numerical ceiling. The EBA (GL/2022/14, paragraph 111) applies a single weighted-average 5-year cap at IMS level, per currency, across core and non-core combined for in-scope categories — a unitary cap on the aggregate, not a ceiling on core maturity. The PRA (SS31/15) applies a substantively equivalent 5-year cap with marginally narrower scope (operational deposits from financial customers excluded). The US (Fed/OCC/FDIC) has adopted no explicit cap — IRR measurement stays principles-based, assessed through examination. A cross-jurisdictional group can therefore face different effective constraints on the same deposit book depending on which regime applies at each consolidation level.
Watch the name in other contexts. “Core deposits” also has a US funding-stability meaning in supervisory and Call Report use (notably the FDIC's Uniform Bank Performance Report) — broadly total domestic deposits less brokered and large time deposits, with the precise definition revised periodically. It overlaps in spirit with the Basel IRRBB concept but rests on a different definitional basis and is used mainly for liquidity and funding analysis rather than interest rate risk modelling. For the EVE cap mechanics, segmentation and supervisory expectations, see Untangling the Regulatory EVE Caps.