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Net stable funding ratio
Published: 25th March 2017 by William Webster
The NSFR requires banks to maintain stable levels of funding relative to their assets and off-balance sheet liabilities. It is a structural ratio designed to improve both bank and systemic resilience. It is a check on rapid bank balance sheet growth and it discourages banks from holding long term illiquid assets funded through wholesale sources.
It is one of two minimum standards (the other being the Liquidity Coverage Ratio which focusses on holding short term high quality assets to meet short term liquidity shocks). To back this up there are a host of liquidity monitoring tools they impose on banks via regulatory reporting.
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