The EBA publishes an analysis of specific aspects of the net stable funding ratio framework

The European Banking Authority (EBA) today published its Report about some specific aspects of the net stable funding ratio (NSFR) framework. The Report provides an evaluation of the materiality of the specific items analysed as well as an assessment of the impact of possible changes to the current prudential treatment.

The EBA conducted mostly a qualitative analysis based on expert judgement, as well as some sensitivity analysis. The items analysed are derivative contracts, securities financing transactions and unsecured transactions with a residual maturity of less than six months with financial customers, holding of securities to hedge derivative contracts. For the items for which data is available, the report provides an evaluation of the materiality of the phenomena as well as an assessment of the impact of possible changes to the current prudential treatment.

The qualitative analysis focuses on assessing if a different treatment applies in other jurisdictions (such as the UK and the US) and, if that is the case, how those approaches would impact the NSFR in EU banks from a level playing field perspective. The quantitative analysis covers all the credit institutions (major and small/local institutions) for which the EBA receives the data on regular basis and refers to the period June-2021 – December-2022.

All the analysed items have limited materiality in terms of contribution to the total required stable funding and this situation is verified for major as well as smaller banks. A change in the regulatory treatment of such items would probably not have material effects to the institutions, but it would generate costs of compliance. Moreover, the current treatment appears aligned with other jurisdictions so that any changes would jeopardise the harmonisation across the board. Therefore, the EBA believes that changes to the current legislation are not necessary.

Note to the editors

1. This Report has been drafted in accordance with Article 510 (4), (6) and (9) of the Capital Requirements Regulation (CRR).
2. The mandates have two separate deadlines, June 2023 and June 2024. The EBA proposed to merge the two mandates so as to include all the requested analysis in a single report.
3. The Report leverages mostly on qualitative analysis based on expert judgement, supplemented by some sensitivity analysis. The report provides an evaluation of the materiality of the phenomena as well as an assessment of the impact of possible changes to the current prudential treatment.