RBI published the final guidelines on the net stable funding ratio (NSFR), as part of its Basel III Framework on Liquidity Standards. The NSFR guidelines are expected to ensure reduction in funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding to mitigate the risk of future funding stress. NSFR would be binding on banks with effect from a date that will be communicated in due course.
NSFR should be equal to at least 100% on an ongoing basis. However, NSFR would be supplemented by supervisory assessment of the stable funding and liquidity risk profile of a bank. On the basis of such assessment, RBI may require an individual bank to adopt more stringent standards to reflect its funding risk profile and its compliance with the Sound Principles (issued via a circular on Liquidity Risk Management by Banks in November 07, 2012). NSFR would be applicable for Indian banks at the solo as well as the consolidated level. For foreign banks operating as branches in India, the framework would be applicable on a stand-alone basis (that is, for Indian operations only). NSFR as at the end of each quarter (starting date will be announced in due course) should be reported to RBI (Department of Banking Supervision, CO) in the prescribed format (BLR 7) within 15 days from the end of the quarter.
The guidelines are based on the final rules text on NSFR, which BCBS published in October 2014, and take into account the Indian conditions. The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. The NSFR limits over reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.
Keywords: Asia Pacific, India, Banking, Basel III, NSFR, Liquidity Risk, Disclosures, RBI
Previous ArticleECB Updates CCBM Procedures for Eurosystem Counterparties
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).