Banks’ new world: Depositors get a bigger share of rate rises

DIAL into any bank earnings call these days and you will hear lots of talk about “deposit beta”. The phrase came up 29 times in the presentations following results from four of the largest US banks last week. A metric that analysts have tracked for years has hit the mainstream.

What is deposit beta? Technically, it is a measure of the pass-through of monetary policy to savers: The portion of change in the central bank rate that a financial institution passes on to customers via higher deposit rates.

But it is also a measure of pricing power: the lower the deposit beta, the better for bank shareholders; the higher, the better for customers.