ARTICLE
10 May 2016

FDIC Rule To Address Banks' Liquidity Risk

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Herbert Smith Freehills Kramer LLP

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FDIC chairman Martin Gruenberg released a proposal for establishing a net stable funding ratio (NSFR), part of the effort to strengthen banks' liquidity in the event of market instability.
United States Finance and Banking

FDIC chairman Martin Gruenberg released a proposal for establishing a net stable funding ratio (NSFR), part of the effort to strengthen banks' liquidity in the event of market instability. FDIC says the proposal is consistent with the Basel standard set in 2015, although it differs by providing a narrower definition of a "high-quality liquid asset" and a way to address "trapped liquidity." Bank holding companies and depository institutions with $250 billion or more in total consolidated assets or $10 billion or more in foreign exposure will be subject to the NSFR. The Federal Reserve Board will release a less-stringent version for holding companies with at least $50 billion, FDIC said.

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