17 December 2015
The European Banking Authority (EBA) published today its report on the impact assessment and calibration of the Net Stable funding Ratio (NSFR), recommending the introduction of the NSFR in the EU to ensure stable funding structures. The analysis did not find strong statistical evidence of significant negative impacts of the NSFR on bank lending, financial assets markets or trading book positions. The EBA also explained that certain EU specificities should be taken into account. The report will inform the work of the European Commission on potential legislative proposals on NSFR.
The EBA report recommends the introduction of the NSFR in the EU to ensure an appropriate stable funding structure in relation to the degree of asset illiquidity, as the way of properly mitigating funding risk in banks. The report also flagged that while the Basel NSFR standard is seen as fitting well within the EU banking framework, certain EU specificities should be taken into account. This is in particular the case of trade finance, pass-through models, CCPs, centralised regulating savings and residential guaranteed loans.
The analysis carried out did not reveal strong statistical evidence of any significant detrimental effects of the NSFR on bank lending, financial assets markets or trading book positions in banks, other than some possible adjustment in prices. However, the EBA stands ready to provide, where needed, further technical advice on the potential impact of the NSFR on derivatives in the context of possible developments at international level in particular.
The EBA report did not find arguments to exempt certain banks from being subject to compliance with the NSFR because of their size. However, it also stressed that the EBA will explore more in detail the costs of implementing the reporting requirements for smaller banks, and stands ready to conduct further work on possible metrics for an effective application of the principle of proportionality.
The report has been developed on the basis of articles 510 (1) and (2) of the Regulation 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (CRR).
The analysis developed by the EBA combines an empirical assessment with theoretical discussions and has aimed at reaching the full calibration of the NSFR. The EBA explained that the findings and recommendations rely on the outcome of the empirical analysis, in spite of some limitations in data availability.