Non-maturity deposit (NMD)
Regulatory Definition
A deposit with no contractual maturity date that the depositor can withdraw at any time, typically without penalty.
EBA GL/2022/14
What This Actually Means
Current accounts, instant access savings, transactional accounts — anything your customers can take out tomorrow but in practice mostly don't. They have no contractual end date, so you have to model when they'll actually leave and how they'll reprice.
Where It Matters
THE single most important modelling challenge in IRRBB. NMDs are typically 40-70% of retail bank funding. Your assumption about how long they stay and how they reprice drives EVE sensitivity more than any other input — a one-year change in assumed NMD duration can breach or clear the SOT threshold.
The repricing assumption is equally critical for NII and earnings sensitivity. The pass-through rate (also known as the deposit beta) — how much of a rate move you choose or are forced to pass on to depositors — directly determines your net interest margin in every rate scenario. A conservative pass-through assumption flatters NII in rising rate environments but creates franchise risk if competitors offer better rates and deposits migrate. An aggressive pass-through assumption protects volume but compresses margin. Neither is right in all environments, and the assumption you embed in your NII model is effectively a statement about your competitive positioning and pricing strategy — not just a technical modelling choice.
Deposits with no contractual end date. The biggest IRRBB modelling challenge.