Net Stable Funding Ratio (NSFR)
The Net Stable Funding Ratio (NSFR) measures the stability of a financial institution’s medium and long-term funding and is a key metric in managing its liquidity and funding risks. It is designed to assess whether longer term assets on a bank’s balance sheet can be covered sufficiently by stable funding. The objective of the NSFR is to encourage banks to diversify their sources of funding and limit their reliance on short-term wholesale markets
The Net Stable Funding Ratio calculation consists of two components, the ASF or Available Stable Funding and the RSF or Required Stable Funding
Available Stable Funding (ASF) – This is a measure of a bank’s capital and liabilities that is estimated to remain with the bank for more than one year. This consists primarily of deposits, capital and deposits and borrowings
Required Stable Funding (RSF) – This represents the funding requirements of a bank over the next year. It is a based on of assets such as loans, securities, cash and off balance sheet exposures
Weights are applied to the products within both the ASF and RSF dependent on residual maturity, customer type and product type
The NSFR is defined as the amount of stable funding available (ASF) as a proportion of the stable funding required (RSF). The ratio must be greater than or equal to 100% as shown below
If the ratio is less than 100%, this indicates that the financial institution is unable to cover its medium to long-term funding requirements
The NSFR return consist of the following reports
- C80 – Required Stable Funding
- C81 – Available Stable Funding
- C84 – Summary NSFR