In 2008 the Basel Committee on Banking Supervision (BCBS) published Principles for Sound Liquidity Risk Management and Supervision (the Sound Principles) which provide detailed guidance on the risk management and supervision of funding liquidity risk.
Following the publication of the Sound Principles the BCBS published two minimum standards for funding and liquidity. These standards sought to promote two separate but complementary objectives. The first objective is to promote the short term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient high-quality liquid assets to survive a significant stress scenario lasting for 30 days. To this end the BCBS published Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools. The second objective is to reduce funding risk over a longer time horizon by requiring banks to conduct their activities with funding from sources that are sufficiently stable to mitigate the risk of future funding stress. To achieve this objective the BCBS published Basel III: The Net Stable Funding Ratio.
The BCBS has now published a consultative document on disclosure standards for the Net Stable Funding Ratio (NSFR). Like the disclosure standards for the Liquidity Coverage Ratio, these new standards are intended to improve transparency of regulatory funding requirements, reinforce the Sound Principles, enhance market discipline and reduce uncertainty in the markets as the NSFR is implemented.
The deadline for comments on the consultative document is 6 March 2015.
The NSFR will become a minimum standard by 1 January 2018. Consistent with this implementation date supervisors will give effect to the disclosure requirements, and banks will be required to comply with them from the date of the first reporting period after 1 January 2018.