Pursuant to the Basel III framework, the Office of the Comptroller of the Currency, the U.S. Treasury Department, the Board of Governors of the Federal Reserve System (the "FRB") and the FDIC proposed a rule to implement a net stable funding ratio ("NSFR") requirement for large and internationally active banking organizations. The proposed rule amends certain definitions in the liquidity coverage ratio rule that are applicable to the NSFR.
The NSFR is a quantitative metric designed to measure the stability of a bank's funding profile. The proposed NSFR requirement is intended to reduce the likelihood that disruptions to a bank's regular sources of funding will compromise its liquidity position. Under the proposed requirement, a covered company calculates a weighted measure of the stability of its equity and liabilities (its available stable funding amount, or "ASF amount") over a one-year time horizon. The ASF amount must be greater than or equal to a minimum level of stable funding (its required stable funding amount, or "RSF amount"). The proposed rule requires a covered company to maintain a minimum NSFR of 1.0.
Beginning on January 1, 2018, the proposed NSFR requirement applies to bank holding companies, certain savings and loan holding companies, and depository institutions that have (i) $250 billion or more in total consolidated assets or (ii) $10 billion or more in total on-balance sheet foreign exposure. Further, the proposal applies to any of their consolidated subsidiaries that are depository institutions with $10 billion or more in total consolidated assets.
The FRB also invited comments on a modified NSFR requirement for both bank holding companies and savings and loan holding companies that are without significant insurance or commercial operations and have $50 billion or more, but less than $250 billion, in total consolidated assets and less than $10 billion in total on-balance sheet foreign exposure.
Comments on both proposed requirements are due by August 5, 2016.
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