The Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System (collectively, the agencies) are adopting a final rule to implement the Net Stable Funding Ratio (NSFR). The NSFR measures the stability of the funding profile of certain large banking organizations and requires these banking organizations to maintain minimum amounts of stable funding to support their assets, commitments, and derivatives exposures over a one-year time horizon.
Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter is not applicable to depository institutions with total assets of less than $1 billion.
- Requires certain large banking organizations to fund their activities with stable sources of funding on an ongoing basis, reducing the possibility that funding shocks would substantially increase distress at individual banking organizations.
- Finalizes the NSFR proposed rule issued by the agencies in 2016, with certain adjustments in response to public comments. The final rule implements the Basel NSFR standard with modifications that address specific characteristics of U.S. markets, practices of U.S. banking organizations, and domestic policy objectives.
- Applies full NSFR requirements to Category I and II banking organizations as well as Category III banking organizations that have $75 billion or more in average weighted short-term wholesale funding (WSTWF).
- Applies reduced NSFR requirements calibrated to 85 percent of the full NSFR requirement to Category III banking organizations with less than $75 billion in WSTWF, and reduced NSFR requirements calibrated to 70 percent of the full NSFR requirement to Category IV banking organizations with $50 billion or more in WSTWF.
- Applies the NSFR to Category I, II, and III depository institution subsidiaries with total consolidated assets of $10 billion or greater.
- Complements the Liquidity Coverage Ratio, which addresses the risk of increased net cash outflows over a 30-calendar day period of stress, by focusing on the longer-term stability of a banking organization’s funding profile across all market conditions.
- Has an effective date of July 1, 2021.
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