Net Stable Funding Ratio

From ACT Wiki
Revision as of 12:36, 17 November 2016 by imported>Doug Williamson (Update.)
Jump to navigationJump to search

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.


See also