1. finance
2. bank

Net Stable Funding Ratio
Overview
The Net Stable Funding Ratio (NSFR) is one of the Basel Committee on Banking Supervision’s (BCBS) key
reforms to promote a more resilient banking sector. The NSFR requires banks to maintain a stable funding profile
in relation to the composition of their assets and off- balance sheet activities. The BCBS has defined the NSFR as
“the amount of available stable funding relative to the amount of required stable funding. This ratio should be equal
to at least 100% on an ongoing basis.”1 In line with the original timeline specified in the 2010 publication of the
liquidity risk framework,2 the NSFR will become a minimum standard by January 1, 2018.
Stock of high-quality liquid assets
Liquidity Coverage
ratio
1M
objective: “ensure that long
term assets are funded with
at least a minimum amount of
stable liabilities in relation to
their liquidity risk profiles (..) ”
1Y
Available amount of stable funding
Required amount of stable funding
The Federal Reserve Board has recently
signaled that a proposal for the U.S.
implementation of the Basel III Net
Stable Funding Ratio (NSFR) is coming
soon.3 Compliance with these requirements
presents significant challenges
for financial institutions.
Preparedness
NSFR readiness is an important
consideration as financial institutions are
in the process of building and obtaining
new data sets in response to increasing
regulatory demands (e.g., Liquidity
Coverage Ratio, FR-2052a, Dodd-Frank
Internal Liquidity Stress Testing).
KPMG takes a strategic approach to help
clients prepare for NSFR.
Lessons Learned
100%
Time horizon
2
100%
IV
0/N
Total net cash outflows
over the next 30 calendar days
IV
1
objective: “ensure that a bank maintains
an adequate level of unencumbered,
high-quality liquid assets that can be
converted into cash to meet its liquidity
needs for a 30 calendar day time horizon
under a significantly severe liquidity stress
scenario specified by supervisors”
KPMG’s experience in assisting global
banks to prepare for the implementation
of other Basel III standards has resulted
in a number of ‘lessons learned’ over the
past several years.
Net Stable Funding ratio
Below is a summary of key takeaways observed from our prior engagements:
Identify &
Manage Competing
Priorities
• Employ strong project management skills
• Take the time to articulate the target state
Account for
Moving Regulatory
Targets
• Maintain dialogue with peers and regulators
• Build in sufficient system and operational flexibility
Solve for Daily
Reporting
Needs
• Invest in infrastructure to automate and standardize
daily analytical reporting
• Focus on process for report production and ongoing monitoring
Build a
Strategic
Solution
• Think strategically across the entire organization
• Incorporate requirements for other analytical systems
Focus on Data
Quality &
Controls
• Move data quality controls upstream
• Plan for a third-party validation
Determine
Financial
Impact
• Understand which regulatory ratio is your binding constraint
• Begin to build a buffer & adjust internal pricing
Basel III: the net stable funding ratio, BCBS, October 2014
Basel III: International framework for liquidity risk measurement, standards and monitoring, BCBS, December 2010
3 Governor Daniel K. Tarullo, Advancing Macroprudential Policy Objectives, speech, January 30, 2015
1 2 Next Steps
• Leverage resources and processes used in the
implementation of Liquidity Coverage Ratio and other
regulatory-related initiatives.
• Improve understanding of current data gaps against
existing internal and external regulatory reporting.
• Identify business line impact and determine need for new
processes.
• Develop a project plan and begin securing resources/project
funding for implementation of a strategic solution.
How can KPMG assist?
KPMG’s Liquidity Risk Management team can help create
well-controlled, integrated, and broad liquidity risk management
practices. We offer a practical approach for mitigating liquidity
risks by addressing its sources head on. We customize our
offering to match the specific needs of your institution.
KPMG has the scale, industry insight, and multidisciplinary
range of services to help your institution make informed
business decisions and better realize long-term value.
Provide Subject
Matter Input
Provide Industry
Benchmarking
Knowledge across broad
aspects of liquidity
regulation (i.e., governance,
funding, stress testing,
contingency funding plan,
liquidity risk monitoring, and
collateral management).
Benchmarking and detailed
analysis.
Why KPMG?
The KPMG liquidity team has professionals with extensive
experience with financial risk management services and
include former corporate treasurers, corporate risk managers,
cash managers, bank regulators and auditors.
KPMG delivers services by leveraging the strength of
KPMG’s Financial Risk Management practice in order to
present a cross-functional team that is able to achieve:
• Deep regulatory insights – knowledge of regulatory
expectations and how to work with regulators
• Business knowledge – experience with pricing and
risk allocation that helps management make informed
business decisions
• Data and technology – experience assisting clients with
sourcing required components and designing an architecture
that meets tight regulatory timelines
• Project management – project setup support, monitoring
progress, and keeping stakeholders on track
Conduct Gap Analysis, Staff,
and Data and Technology
Assessments
PMO Support
Questionnaires, checklists,
requirements grids, policy
templates, and operating
models.
Project plan, weekly status,
and issues/resolutions/
escalation report by
deliverable.
For more information on KPMG’s Liquidity Risk Advisory Services, or to arrange
an in-house presentation, please contact one of the representatives listed below
or visit the KPMG Liquidity Risk website at www.kpmg.com/us/liquidity.
Rob Ceske
Principal
T: 914-308-0188
E: [email protected]
Jeff Dykstra
Director
T: 312-519-1151
E: [email protected]
Marshal Auron
Director
T: 980-395-9677
E: [email protected]
Marcia Ryder
Director
T: 612-619-1928
E: [email protected]
Jane Shen
Director
T: 732-221-3483
E: [email protected]
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