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Wednesday, January 4, 2017

Trades Highlight Differences in European, U.S. Plans for NSFR

A joint comment letter by ABA and several financial trade groups highlighted the differences between U.S. and European Union proposals for the Net Stable Funding Ratio, a long-term liquidity measurement included in the Basel III liquidity standards.

The associations identified a total of 10 primary differences (along with a number of technical discrepancies) between the two proposals, including the required stable funding levels assigned to Level 1 securities, unsecure wholesale lending, gross derivatives and other activities. The groups also noted that while the U.S. proposal is set to take effect Jan. 1, 2018, the European proposal would not be in effect until 2019 at the earliest.

ABA previously criticized the U.S. proposal for the NSFR, which consists of the amount of available stable funding over a year divided by the institution’s required stable funding, with the numerator required to equal or exceed the denominator. In previous comments, the association said that the NSFR is unnecessary, given the wide array of regulatory standards already in place, and added that it relies on flawed assumptions.

If adopted, the U.S. proposal would apply to banking institutions with more than $250 billion in total assets or $10 billion or more in on-balance sheet foreign exposures. A modified NSFR would apply to institutions with between $50 billion and $250 billion in assets.

Read the joint comment letter.

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