Net Stable Funding Ratio: Read the Funding Behind the Number

A worked example using disclosed weighted amounts

Assume a hypothetical bank reports ASF of $115 billion and RSF of $100 billion for the same entity and date. Its NSFR is 115%, leaving $15 billion of weighted funding above required funding. These amounts are already weighted; do not apply factors to them again. The following scenarios isolate one change at a time and are arithmetic illustrations, not forecasts or regulatory stress tests.

Why the funding categories matter

NSF30 assigns factors by counterparty, maturity and other conditions. Selected Basel examples: eligible capital and qualifying funding of at least one year receive 100% ASF; qualifying stable and less-stable retail deposits receive 95% and 90%. Short-term non-financial corporate funding can receive 50%, so not all wholesale funding below six months has zero ASF. Insurance alone does not establish a deposit classification.

• RSF depends on asset eligibility and encumbrance. A 65% mortgage factor requires specified conditions, including residual maturity of at least one year and a qualifying risk weight. Other qualifying performing long-term loans can receive 85%; an unrated commercial loan is not automatically 100%.
• Use the full regulatory schedules for derivatives, collateral and commitments. These selected examples are not a complete calculation rulebook.

Do not confuse reporting frequency with public disclosure

Basel NSF20 requires reporting at least quarterly. That is different from how often a bank must publish the number. The US agencies’ 2020 final-rule announcement describes a tailored framework for large banks and semiannual public disclosure from 2023 for covered holding companies and covered nonbank companies regulated by the Federal Reserve. It does not impose identical rules on every commercial bank worldwide.

• Basel NSF10 applies the standard to internationally active banks on a consolidated basis, while allowing broader domestic application. Check jurisdiction, entity scope, effective rules and any national discretion.
• When comparing banks, record the disclosure date, measurement basis and any changes in consolidation. A subsidiary ratio and a group ratio may describe different funding pools.

What 115% does and does not tell you

In the example, 115% means weighted available funding exceeds weighted required funding by 15%. It does not mean cash equals 115% of deposits, that 15% of assets can be lost safely, or that the bank can meet every withdrawal. A ratio can also rise because assets shrink. Read funding concentration, asset quality, capital and short-term liquidity alongside it. There is no universal “robust” supervisory rating attached to 115% in the cited Basel standard.

• NSFR addresses structural funding; the liquidity coverage ratio addresses short-term stressed liquidity. Neither substitutes for a capital adequacy assessment.
• A shortfall must be assessed under the applicable local rules and supervisory process. Do not infer an automatic dividend ban, credit-rating downgrade or insolvency from the ratio alone.