Page 37 - Banking Finance October 2019

ARTICLE

Minimum Requirement of Stable Fund economy in order to ensure the continuity of this type
of intermediation.
Available Stable Funding (ASF)
NSFR= 100% b) Bank behavior - The NSFR is calibrated under the
Required Stable Funding(RSF) assumption that banks may seek to roll over a significant
proportion of maturing loans to preserve customer
The above ratio should be equal to at least 100% on an relationships.
ongoing basis. However, the NSFR would be supplemented c) Asset tenor - The NSFR assumes that some short-dated
by supervisory assessment of the stable funding and liquidity assets (maturing in less than one year) require a smaller
risk profile of a bank. On the basis of such assessment, the proportion of stable funding because banks would be
Reserve Bank of India may require an individual bank to able to allow some proportion of those assets to mature
adopt more stringent standards to reflect its funding risk instead of rolling them over.
profile and its compliance with the Sound Principles.
d) Asset quality and liquidity value - The NSFR assumes
that unencumbered, high-quality assets that can be
NSFR would be binding on banks with effect from a date
which will be communicated in due course. The NSFR would securitized or traded, and thus can be readily used as
be applicable for Indian banks at the solo as well as collateral to secure additional funding or sold in the
consolidated level. For foreign banks operating as branches market, do not need to be wholly financed with stable
in India, the framework would be applicable on stand-alone funding.
basis for Indian operations only.
Additional stable funding sources are also required to support
at least a small portion of the potential calls on liquidity
Calibrations of ASF and RSF - Criteria arising from Off balance sheet (OBS) commitments and
and Assumptions contingent funding obligations.
ASF and RSF reflect the amount of funding available and
required for liabilities and assets (including off balance sheet Definition and computation of Available

assets). The amounts of ASF and RSF specified in the BCBS Stable Funding(ASF)
standard are calibrated to reflect the presumed degree of
The amount of ASF is measured, based on the broad
stability of liabilities and liquidity of assets.
characteristics of the relative stability of an institution's
funding sources, including the contractual maturity of its
The calibration reflects the stability of liabilities liabilities and the differences in the propensity of different
across two dimensions: types of funding providers to withdraw their funding. The
a) Funding tenor - The NSFR is generally calibrated such amount of ASF is calculated by first assigning the carrying
that longer-term liabilities are assumed to be more value of an institution's capital and liabilities to one of five
stable than short-term liabilities. categories as presented below. The amount assigned to each

b) Funding type and counterparty - The NSFR is calibrated
under the assumption that short-term (maturing in less
than one year) deposits provided by retail customers
and funding provided by small business customers are
behaviorally more stable than wholesale funding of the
same maturity from other counterparties.

In determining the appropriate amounts of required stable
funding for various assets, the following criteria are taken
into consideration, recognizing the potential trade-offs
between these criteria:
a) Resilient credit creation - The NSFR requires stable
funding for some proportion of lending to the real

BANKING FINANCE | OCTOBER | 2019 | 37