Impact of NSFR Reform Explored in Newly Released White Paper from Wolters Kluwer Financial Services
Banks should consider being prudent in business expansion by establishing stable funding driven by effective asset and liability management. That’s according to “Managing NSFR by Matching Conversion Ratios,” a new white paper released today by Wolters Kluwer Financial Services. The report looks at the Net Stable Funding Ratio (NSFR), a Basel Committee reform designed to promote a resilient banking sector, and urges banks to conduct marginal analysis to manage the NSFR.
During the early months of the financial crisis many banks, while meeting existing capital requirements, experienced significant difficulties as they had not prudently managed liquidity. The NSFR will effectively require banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. It is defined as the Available Stable Funding (ASF) divided by the Required Stable Funding (RSF) and will be effective on January 1, 2018.
“Sustainable funding will be of vital significance going forward, especially for the financial institutions heavily reliant on wholesale funding,” said Spark Wang Jun, senior regulatory intelligence expert at Wolters Kluwer Financial Services and author of the report. “And this is a key factor to be reconsidered during the decision making for the divestment of retail business units.”
A key finding of the white paper is that banks should now look to set their own strategy based on the NSFR guidelines and business structure. They can do this, for example, by analysing Funding Determinants of the conversion ratios and calculating the Net Stable Funding Ratio under the Matching Principle.
Visit the Wolters Kluwer Financial Services website to download the whitepaper.
About Wolters Kluwer Financial Services
Wolters Kluwer Financial Services provides customers worldwide with risk management, compliance, finance and audit solutions that help them successfully navigate regulatory complexity, optimize risk and financial performance, and manage data to support critical decisions. With more than 30 offices in 20 countries, our prominent brands include: AppOne®, AuthenticWeb™, Bankers Systems®, Capital Changes, CASH Suite™, GainsKeeper®, NILS®, OneSumX®, TeamMate®, Uniform Forms™, VMP® Mortgage Solutions and Wiz®. Wolters Kluwer Financial Services is part of Wolters Kluwer, which had 2014 annual revenues of €3.7 billion ($4.9 billion), employs 19,000 employees worldwide, and maintains operations in over 170 countries across Europe, North America, Asia Pacific, and Latin America. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.