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ARTICLE · 12 NOVEMBER 2020

US Bank Regulators Finalize Net Stable Funding Ratio Rule

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The proposed and final NSFR rules differ from the standard developed by the BCBS based on US-market specific factors.

United StatesFinance and Banking
Bradley Berman
Bradley Berman
Matthew Bisanz
Matthew Bisanz
Zhaochen Dai
Zhaochen Dai
J. Paul Forrester
J. Paul Forrester
Anna T. Pinedo
Anna T. Pinedo
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Despite attracting recent controversy from some—who have noted that if it had been in effect earlier in 2020, initial financial stress from the COVID-19 pandemic would have been worse—the long-anticipated net stable funding ratio (NSFR) rule has been finalized by the Agencies. The NSFR was developed after the 2008 financial crisis revealed that an over-reliance on short-term, less-stable funding sources could make large banking organizations more susceptible to funding changes. The NSFR rule is a quantitative liquidity standard that was originally adopted in October 2014 by the BCBS as part of the Basel III regime and was first proposed by the Agencies in 2016. The proposed and final NSFR rules differ from the standard developed by the BCBS based on US-market specific factors.

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