Net Stable Funding Ratio: Difference between revisions
imported>Doug Williamson (Create the page to replace Net stable funding ratio page.) |
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(NSFR). | (NSFR). | ||
A longer-term funding measure under Basel III regulations | A longer-term funding measure under Basel III regulations. | ||
The NSFR requires longer-term and less liquid bank assets to be funded by longer-term, more stable liabilities, assuming a stressed scenario. | The NSFR requires longer-term and less liquid bank assets to be funded by longer-term, more stable liabilities, assuming a stressed scenario. | ||
Revision as of 12:36, 17 November 2016
Bank regulation - funding risk
(NSFR).
A longer-term funding measure under Basel III regulations.
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.
