Deposit Beta
The fraction of a central-bank policy-rate change that a bank passes through to its depositors. A bank with deposit beta of 20 percent passes only 20 cents of every dollar of rate hike to depositors, keeping the other 80 cents as widened margin; a bank with deposit beta of 80 percent passes most of the hike through and sees little margin expansion. Sticky, low-beta funding (checking accounts, small-business operating accounts, long-relationship retail deposits) is the most valuable funding a bank can have and is the single biggest driver of cross-sectional NIM variation through rate cycles.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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