Banking Agencies Propose Net Stable Funding Ratio: Mechanistic Approach to Liquidity Continues

PLI Webcast

09/22/2016 01:00 p.m. - 02:00 p.m. EDT

Banking + Financial Services, Corporate Finance | Capital Markets, Financial Institutions + Financial Services, and Financial Services

Oliver I. Ireland

Oliver I. Ireland


On June 1, 2016, the federal banking agencies published a proposed rule, to be effective January 1, 2018, that would require large banks to maintain a minimum Net Stable Funding Ratio (NSFR) over a 30-day horizon. The proposed rule adds to a line of recent liquidity measures aimed at improving the stability of the largest U.S. banking organizations and the U.S. financial markets as a whole. If adopted, the proposed NSFR rule likely would achieve one of its goals—to increase the self-sufficiency of the banking organizations subject to it. But it is uncertain whether the proposed rule would achieve its other goal—that is, to improve overall market liquidity. The industry may be able to look to more concrete guidance once the agencies have considered comments received and the NSFR rule is finalized in the coming months. 

During this session, we will discuss:

  • Overview of recent liquidity measures and interplay between short-term LCR Rule and long-term NSFR;
  • Application and scope of the NSFR;
  • Calculation of the NSFR;
    • Calculation of ASF Factors based on expected stability of equity and liabilities; and
    • Calculation of RSF Factors based on liquidity characteristics of assets, derivatives, and exposures;
  • NSFR shortfall and disclosure requirements; and
  • Potential impact of NSFR if finalized.

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