On 29 June 2018, the Basel Committee on Banking Supervision (Basel Committee) approved a technical amendment to the way extraordinary monetary policy operations are treated in the net stable funding ratio (NSFR).
Effective immediately, this amendment to the NSFR standard allows reduced required stable funding factors for central bank claims with a maturity of more than six months, subject to a floor of 5%. The amendment aims to provide greater flexibility in the treatment of extraordinary central bank liquidity-absorbing monetary policy operations. The amendment adds the following text to paragraph 29 of the NSFR standard:
“In the case of exceptional central bank liquidity absorbing operations, claims on central banks may receive a reduced RSF [required stable funding] factor. For those operations with a residual maturity equal to or greater than six months, the RSF factor must not be lower than 5%. When applying a reduced RSF factor, supervisors need to closely monitor the ongoing impact on banks’ stable funding positions arising from the reduced requirement and take appropriate measures as needed. Also, as further specified in paragraph 31, assets that are provided as collateral for exceptional central bank liquidity providing operations may receive a reduced RSF factor which must not be lower than the RSF factor applied to the equivalent asset that is unencumbered. In both cases, supervisors should discuss and agree on the appropriate RSF factor with the relevant central bank.”