July 1st is one of the most exciting and hectic days here at The Banque as it is the day all of our transactions occur. For those of you unfamiliar with The Banque.
The Banque model deploys a half year “convention”, meaning that all transactions occur on July 1 of each year in order to achieve an averaging for the year. Deposit gathering and loan originations / closings, investment maturities and purchases, loan payments and pay-offs, CD maturities, borrowings and all such transactions are all deemed to occur as of July 1 of each year. All historical “look-back” calculations also reflect this July 1st consistency.
But most importantly, July 1 is the day that rates change and products re-price.
In making The Banque as realistic, meaningful, impactful and educational as possible, the concept of how to capture the multiple-times-daily aspect of transactions that occur in our institutions provides a challenge. Averaging is the practical necessity.
On July 1 and January 1 the architects of The Banque gather data to document and memorialize where banking product rates generally stand in relation to the Fed’s rate. This is important as we set scenarios going forward and to accurately reflect historical rates, because, guess what, on next July 1st , today’s rates “are” the historical rates.
If your school or ed program is still using an old model, contact us here in the 21st century and we’ll walk you through what today’s model ought to look like to teach the next generation of bankers. The next generation thinks differently. Time for our education to reflect that!
