On October 31, 2014, the Basel Committee on Banking Supervision ("Basel Committee") issued its final standard for the Net Stable Funding Ratio ("NSFR"). The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available Stable Funding" is defined as the portion of a bank's capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which is one year. The amount of such stable funding required, also known as Required Stable Funding, of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution, as well as those of its off-balance sheet exposures. The final NSFR standard is similar in structure to the 2014 consultative proposals. However, several changes were introduced in the final standard, including in relation to the required stable funding for: (i) short-term exposures to banks and other financial institutions; (ii) derivatives exposures; and (iii) assets posted as initial margin for derivative contracts. The NSFR will become a minimum standard by January 1, 2018. The Basel Committee is currently developing disclosure standards for the NSFR, which are expected to be published for consultation around year end.
The final standard for the NSFR is available at: http://www.sfindustry.org/images/uploads/pdfs/Basel_Final_Net_Stable_Funding _Ratio.pdf.
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