Net Stable Funding Ratio
Bank regulation - funding risk
(NSFR).
A longer-term funding measure under Basel III regulations, also written 'Net Stable Funding Ratio'.
The NSFR requires longer-term and less liquid bank assets to be funded by longer-term, more stable liabilities, assuming a stressed scenario.
Although subject to domestic definitions and detailed calculations and weightings, the broad objective is to ensure that a bank is not financing loans and other credit transactions with short term funding, as occurred pre-2008 when banks were funding long term loans with short term interbank funding.
The NSFR is defined as the ratio of Available Stable Funding (ASF) to Required Stable Funding (RSF):
NSFR = ASF / RSF
A ratio of 100% or greater means that the bank has enough stable funding available, to meet its requirements under this measure.
The ratio is intended to ensure a bank remains liquid for up to one year during a crisis.
This requirement is intended to be implemented by 1 January 2018.
