What is the Net Stable Funding Ratio (NSFR) ?

What is the Net Stable Funding Ratio (NSFR) ?

Moorad Choudhry

25 years: Treasury & ALM

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.

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.

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What is the Net Stable Funding Ratio (NSFR) ?

7 mins 35 secs

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

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Summary
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