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 ArticleACPR Updates Taxonomic Controls for Taxonomy RAN 1.1.0 for Insurers
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.