Net Stable Funding Ratio: Difference between revisions
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''Bank regulation - funding risk'' | ''Bank regulation - funding risk''. | ||
(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. | ||
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. | 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 unstable short term funding, as occurred pre-2008 when many banks were funding long term loans with short term interbank funding. | ||
| Line 20: | Line 20: | ||
The ratio is intended to ensure a bank remains liquid for up to one year during a crisis. | The ratio is intended to ensure a bank remains liquid for up to one year during a crisis. | ||
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* [[Available Stable Funding]] | * [[Available Stable Funding]] | ||
* [[Basel III]] | * [[Basel III]] | ||
* [[Funding]] | |||
* [[Funding ratio]] | |||
* [[Funding risk]] | |||
* [[Leverage Ratio]] | |||
* [[Liquidity]] | * [[Liquidity]] | ||
* [[Liquidity Coverage Ratio]] | * [[Liquidity Coverage Ratio]] | ||
* [[Loan to deposit ratio]] | * [[Loan to deposit ratio]] | ||
* [[Required Stable Funding]] | * [[Required Stable Funding]] | ||
* [[Stress]] | * [[Stress]] | ||
[[Category:Accounting,_tax_and_regulation]] | |||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Manage_risks]] | |||
Latest revision as of 20:56, 4 July 2022
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 unstable short term funding, as occurred pre-2008 when many 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.
