NEV Shares At Par
Q: Does assuming NEV non-maturity deposits at par isolate changes in balance sheet structure?
A: No.
Some people think that valuing non-maturity deposits at par is more conservative and isolates changes in balance sheet structure simulation to simulation. This is not the case. NEV with non-maturity deposits at par shows exactly the same result whether 10% or 50% of the credit union’s structure is in money markets. It also shows the same result regardless of whether these rates are 10 basis points or 210 basis points. How can this type of analysis isolate changes in balance sheet structure when it ignores the deposit mix and deposit pricing? Ignoring sources of risk cannot be considered conservative.
