The Net Stable Funding Ratio: Impact and Issues for Consideration

44 Pages Posted: 18 Jul 2014

See all articles by Jeanne Gobat

Jeanne Gobat

International Monetary Fund (IMF)

Mamoru Yanase

International Monetary Fund (IMF)

Joseph Maloney

International Monetary Fund (IMF)

Date Written: June 2014

Abstract

As part of Basel III reforms, the NSFR is a new prudential liquidity rule aimed at limiting excess maturity transformation risk in the banking sector and promoting funding stability. The revised package has been issued for public consultation with a plan of making the rule binding in 2018. This paper complements earlier quantitative impact studies by discussing the potential impact of introducing the NSFR based on empirical analysis of end-2012 financial data for over 2000 banks covering 128 countries. The calculations show that a sizeable percentage of the banks in most countries would meet the minimum NSFR prudential requirement at end-2012, and, further, that larger banks tend to be more vulnerable to the introduction of the NSFR. Additionally, by comparing the NSFR to other structural funding mismatch indicators, we find that the NSFR is a relatively consistent regulatory measure for capturing banks’ funding risk. Finally, the paper discusses key policy issues for consideration in implementing the NSFR.

Keywords: Banking sector, Liquidity, Financial risk, Risk management, Banking, Bank Regulation, Financing, Firm Size, Policy, off balance sheet, banking supervision, bank for international settlements, banking system, banks ? asset, deposit insurance, investment banking, deposit insurance scheme, bank reserves, liquid asset, country comparison, bank distress, bank data, bank funding, banking systems, banks loans, bank failure, financial inclusion, bank management, banking markets, banking business, banking supervisors, banks ? assets, bank solvency, banking ? sector, banking practices, banks ? balance sheets, bank asset, access to banking, bank runs, central banking, bank debt, banking sector liquidit

JEL Classification: G21, G28, G32, L25

Suggested Citation

Gobat, Jeanne and Yanase, Mamoru and Maloney, Joseph, The Net Stable Funding Ratio: Impact and Issues for Consideration (June 2014). IMF Working Paper No. 14/106, Available at SSRN: https://ssrn.com/abstract=2468011

Jeanne Gobat (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mamoru Yanase

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Joseph Maloney

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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