January 14, 2014 Alert - Basel Committee Proposes Revisions to the Net Stable Funding Ratio
On January 12, 2014, the Basel Committee issued proposed revisions to the Basel framework's Net Stable Funding Ratio (NSFR), following endorsement by the Committee's governing body, the Group of Central Bank Governors and Heads of Supervision (GHOS).The goal of the NSFR is to limit over-reliance on short-term wholesale funding, encourage better assessment of funding risk across all on- and off-balance sheet items, and promote funding stability. Proposals on the NSFR were first published in 2009, and the measure was included in the December 2010 Basel III agreement. The main revisions to the NSFR seek to reduce cliff effects within the measurement of funding stability, improve its alignment with the Liquidity Coverage Ratio (LCR), and alter its calibration to focus greater attention on short-term, potentially volatile funding sources.
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