Basel III Net Stable Funding Ratio (NSFR) update | KPMG | ZA

Basel III Net Stable Funding Ratio (NSFR) update

Basel III Net Stable Funding Ratio (NSFR) update

The Basel Committee has published the latest version of the net stable funding ratio (NSFR), following its consultation paper in January 2014


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The new version does not discuss and justify the (relatively minor) revisions, which all relate to the calculation of the stable funding requirement:

  • Less than six month exposures to other banks and financial institutions will no longer attract a zero weight, but will be weighted at 10% if secured against Level 1 high quality liquid assets, or otherwise at 15%;
  • Assets posted as initial margin for derivatives contracts will be weighted at 85% (previously 100%); and
  • Derivatives exposures (if derivative assets exceed derivative liabilities) will be weighted at 100% (this appears to be rewording of how the exposure is calculated, rather than a change in the weighting).

The first of these changes will be significant for banks with large short-term interbank exposures, since 10% or 15% of these will have to be backed by stable (primarily retail or over one year wholesale) funding.

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