The NSFR consists primarily of internationally agreed-upon definitions and calibrations. Some elements, however, remain subject to national discretion to reflect jurisdiction-specific conditions. In these cases, SAMA has explicitly and clearly outlined these in the regulation.
|
As a key component of the SAMA supervisory approach to funding risk, the NSFR will be supplemented by supervisory assessment work. SAMA may require an individual bank to adopt more stringent standards to reflect its funding risk profile and the SAMA assessment of its compliance with the Sound Principles.
|
The amounts of available and required stable funding specified in the standard are calibrated to reflect the presumed degree of stability of liabilities and liquidity of assets.
|
| The calibration reflects the stability of liabilities across two dimensions: |
| | (a) | Funding tenor - The NSFR is generally calibrated such that longer-term liabilities are assumed to be more stable than short-term liabilities. |
| | (b) | Funding type and counterparty - The NSFR is calibrated under the assumption that short-term (maturing in less than one year) deposits provided by retail customers and funding provided by small business customers are behaviourally more stable than wholesale funding of the same maturity from other counterparties.
|
| In determining the appropriate amounts of required stable funding for various assets, the following criteria were taken into consideration, recognizing the potential trade-offs between these criteria: |
| | (a) | Resilient credit creation - The NSFR requires stable funding for some proportion of lending to the real economy in order to ensure the continuity of this type of intermediation. |
| | (b) | Bank behaviour - The NSFR is calibrated under the assumption that banks may seek to roll over a significant proportion of maturing loans to preserve customer relationships. |
| | (c) | Asset tenor - The NSFR assumes that some short-dated assets (maturing in less than one year) require a smaller proportion of stable funding because banks would be able to allow some proportion of those assets to mature instead of rolling them over. |
| | (d) | Asset quality and liquidity value - The NSFR assumes that unencumbered, high-quality assets that can be securitized or traded, and thus can be readily used as collateral to secure additional funding or sold in the market, do not need to be wholly financed with stable funding.
|
Additional stable funding sources are also required to support at least a small portion of the potential calls on liquidity arising from OBS commitments and contingent funding obligations (Prudential Returns - 3).
|
NSFR definitions mirror those outlined in the LCR, unless otherwise specified. All references to LCR definitions or Paras/ text of LCR in this NSFR guidelines, refer to the definitions and Paras/ text in the LCR guidelines published by SAMA. If SAMA chooses to implement a more stringent definition in the LCR rules than those set out in the Basel Committee LCR standard, SAMA will inform banks whether to apply this stricter definition for the purposes of implementing the NSFR requirements in their jurisdiction.
|
