NSFR Calculator

Regulatory Capital: dollars

Stable Demand Deposits: dollars

Less Stable Demand Deposits: dollars

Funding from Corporations: dollars

Required Stable Funding: dollars

1. What is the NSFR Calculator?

Definition: The NSFR Calculator measures a bank's net stable funding ratio, ensuring long-term funding stability under Basel III guidelines.

Purpose: Helps banks and regulators assess funding stability and compliance with regulatory requirements.

2. How Does the Calculator Work?

The calculator computes the NSFR using the following formula and steps:

Formula:

$ \text{ASF} = \text{reg. cap.} + (\text{stable dep.} \times 0.95) + (\text{less stable dep.} \times 0.9) + (\text{cop. fund.} \times 0.5) $

$ \text{NSFR} = \frac{\text{ASF}}{\text{required stable funding}} \times 100 $

Where:

$ \text{ASF} $: Available stable funding (dollars)
$ \text{reg. cap.} $: Regulatory capital (dollars)
$ \text{stable dep.} $: Stable demand deposits (dollars)
$ \text{less stable dep.} $: Less stable demand deposits (dollars)
$ \text{cop. fund.} $: Funding from corporations (dollars)
$ \text{required stable funding} $: Required stable funding (dollars)

Steps:

Step 1: Calculate Available Stable Funding (ASF). Add regulatory capital, 95% of stable demand deposits, 90% of less stable demand deposits, and 50% of corporate funding.
Step 2: Determine Required Stable Funding. Input the amount of stable funding required by the bank.
Step 3: Calculate NSFR. Divide ASF by required stable funding and multiply by 100.

3. Importance of NSFR Calculation

Calculating the NSFR is crucial for:

Funding Stability: Ensures banks maintain sufficient stable funding over a one-year horizon.
Regulatory Compliance: Meets Basel III minimum NSFR requirement (100% or higher).
Risk Management: Identifies potential funding risks during economic stress.

4. Using the Calculator

Example (Bank Alpha): Regulatory capital = $10,000,000, Stable demand deposits = $15,000,000, Less stable demand deposits = $10,000,000, Funding from corporations = $17,000,000, Required stable funding = $35,000,000:

Step 1: ASF = $10,000,000 + ($15,000,000 \times 0.95) + ($10,000,000 \times 0.9) + ($17,000,000 \times 0.5) = $41,750,000.
Step 2: Required stable funding = $35,000,000.
Step 3: $ \text{NSFR} = \frac{41,750,000}{35,000,000} \times 100 \approx 119.29\% $.
Results: ASF = $41,750,000, NSFR = 119.29%.

This indicates Bank Alpha exceeds the minimum NSFR requirement.

5. Frequently Asked Questions (FAQ)

Q: What is the NSFR?
A: The NSFR is a ratio that ensures banks have enough stable funding to support assets and activities over a one-year period.

Q: Why are ASF factors different?
A: ASF factors reflect the stability of funding sources, with higher factors for more reliable sources like regulatory capital.

Q: What does an NSFR above 100% mean?
A: It indicates the bank has more stable funding than required, suggesting financial resilience.