# Liquidity ratio, structural (net stable funding ratio, NSFR)

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- Post ID: 593387
- Modified: 2023-07-25T21:02:00+00:00
- Language: en

## Definition

The ratio of available funding to the stable funding required by the supervisory authorities. The NSFR is thus intended to ensure that institutions are not overly dependent on short-term and thus comparatively highly fluctuating (volatile) sources of funding that are difficult to predict (unpredictable). In other words, an incentive is created to make greater use of long-term refinancing sources. - In the course of the financial crisis that emerged from the subprime crisis, it became clear that the major bottleneck factor in the financial market was not primarily capital, but the ability to sell assets and convert them into cash in the face of unfavorable market conditions. For this reason, banks in the EU must hold the majority - above but not below fifty percent - of their liquidity buffers in hard equity by the beginning of 2019 - the original plan was for the end of 2012. The remaining part may consist of cash, government bonds, high-quality corporate bonds and covered bonds such as Pfandbriefe. In the case of government bonds, the requirement arose to recognize only highly creditworthy securities, i.e. securities issued by countries which, based on reasonable factual consideration and the assessment of investors, are able and willing to repay the loans they have taken out. This is based on a time horizon of twelve months. - See liquidity coverage ratio, liquidity crisis plan, liquidity buffer, liquidity risk, liquidity shock, liquidity regulation, liquidity at risk, emergency reserve, quick ratio. Solvency, solvency supervision, stock approach, scenarios, exceptional. - Cf. 2008 Annual Report of BaFin, p. 51 (CEBS calls for Buffer from permanently liquidatable assets), p. 56 (Rules for liquidity risk management), ECB Monthly Bulletin of July 2009, p. 17 et seq. (Tendency to increase the liquidity cushion in the financial crisis; overviews), Deutsche Bundesbank Annual Report 2009, p. 99 (liquidity buffer as protection against systemic crisis), BaFin Annual Report 2009, p. 51 (CEBS recommendations on the appropriate level and composition of the liquidity buffer), BaFin Annual Report 2010, p. 137 (detailed rules in the wake of the 2010 MaRisk amendment), BaFin Annual Report 2011, p. 66 (specifying details of the calculation) and the respective BaFin Annual Report, chapter "Supervision of Banks, Financial Service Providers and Payment Institutions," ECB Monthly Report of April 2013, p. 86 (definition), Deutsche Bundesbank Monthly Report of June 2013, p. 63 f. (requirements for institutions' liquidity management in the wake of Basel III), Financial Stability Report 2013, p. 105 (NSFR does not preclude national supervisory authorities from specifying further binding liquidity ratios). Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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