NSFR is the available amount of stable funding (ASF) relative to the required amount of stable funding (RSF) where ASF is determined by characteristics of liabilities and equity and RSF is determined by characteristics of assets, commitments, and derivatives. A complement to 30-day LCR, NSFR rules and disclosures per BCBS standards are intended to:
Many NSFR extensions and adoptions are still being finalized. Rule updates in early-adopter regions have included changes to ASF, RSF, HQLA, derivative, variation margins, and short-term lending transactions. New and more granular reporting requirements are anticipated (e.g., C80-84 COREP).
In addition, implementation of and adherence to NSFR requirements has been impacted by Covid-19 driven liquidity pressures, changing volumes of financial products, and conditions of funding markets.
The data gap between LCR and NSFR may be significant because ASF incorporates certain liabilities and regulatory capital and RSF incorporates asset categories and derivative measures not considered in LCR. Liquidity risk management teams must incorporate required datapoints aligned with risk-based capital rules.
To deliver a more granular one-year view and less granular longer-term outlooks, firms must have transaction forecasting solutions that accurately model RSF and ASF components.