What is the Net Stable Funding Ratio (NSFR) ?
The Net Stable Funding Ratio, or NSFR, is one of many liquidity risk metrics used as part of a bank’s suite of risk exposure indicators. Moorad describes the objective of the NSFR and how it is defined, as well as what Available Stable Funding (ASF) and Required Stable Funding (RSF) mean as factors of the NSFR metric.
Overview
NSFR is used to determine how much “available” funding there is for a bank, and how much funding is “required” over the long term. A bank must run an NSFR of above 100% at all times, to indicate that it has a long term stable structural funding position in place. A bank that reports a level below 100% must take steps to either increase its ASF, reduce its RSF, or both.
Key learning objectives:
What is NSFR, and what are its aims?
What is the NSFR metric, and what does it tell us?
Define ASF and RSF
Summary
Expert
Moorad Choudhry
Former senior banker with almost 30 years experience. Moorad has held senior roles in commerical, investment and retail banking. He has also spent the last five years as a visiting professor.
