Definition
The NSFR (net stable funding ratio) compares available stable funding (ASF) with required stable funding (RSF). It must be at least 100%. Where the LCR protects against a thirty-day crisis, the NSFR limits structural maturity transformation on the balance sheet.
Calculation method
NSFR = ASF / RSF.
- ASF weights each funding source by its stability and residual maturity: 100% for own funds and funding beyond one year, high factors for stable retail deposits, low or zero factors for short wholesale funding.
- RSF weights each asset and off-balance-sheet commitment by its liquidity, maturity (under six months, six months to one year, over one year) and any encumbrance.
Regulatory requirement
The NSFR was introduced in the CRR by Regulation (EU) 2019/876 (CRR2), Articles 428a onwards, and has applied since June 2021. It is reported in the supervisory stable funding templates, monitored in the SREP and projected in the ILAAP.
Practical challenges
- Residual maturity and encumbrance of each asset, which require granular collateral data.
- Interdependent assets and liabilities and derogation treatments.
- Breaking down changes between reporting dates and projecting the ratio under the business plan or stress, which means reapplying the weights to a projected balance sheet.
In RIALTO
This concept is covered by the NSFR Insight Core module. The use case 'Explaining a change between two reporting dates' shows it in practice.