Problems with the NSFR

Basel III’s Net Stable Funding Ratio (NSFR) was described in a previous blog. This piece identifies some of the undesirable impacts of the proposal. Unsecured versus secured funding One of most notable features of the NSFR is that unsecured and secured funding sources are given the same ASF factors. In the case of interbank funding…

An introduction to the NSFR for repo dealers in a rush

The NSFR is a key Basel III reform to promote a more resilient banking sector by limiting over-reliance on short-term wholesale funding. It is designed to complement the Liquidity Coverage Ratio (LCR) but, whereas the LCR focuses on cashflow behaviour under market-wide liquidity stresses over 30 days, the NSFR looks at the resilience of the…

Revisions to the Basel Leverage Ratio — a correction

The previous version of this blog questioned why, when the Basel Committee on Banking Supervision issued a revision to the Leverage Ratio in January 2014, it had not allowed the netting of collateral in matched positions with the same counterparty. There is a good reason for this and, I am afraid, the previous blog got…

Revisions to the Basel Leverage Ratio

The first details of the Leverage Ratio were released by the Basel Committee on Banking Supervision in June 2013. The big shock was the exclusion of any form of netting. In January 2014, however, Basel appeared to have relented and issued revisions to the Leverage Ratio that allow limited netting. These changes have been broadly…