The provisions of Article 428o(a) CRR establish that certain liabilities and capital instruments are subject to a 100% available stable funding (ASF) factor. Among these, the text refers to “the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79.”

In practice, two interpretations have emerged:

1. that CET1 items should be taken in full, before any adjustments, deductions or exemptions; or 

2. the provisions of Article 428o(a) CRR establish that certain liabilities and capital instruments are subject to a 100% available stable funding (ASF) factor. Among these, the text refers to “the Common Equity Tier 1 items of the institution before the adjustments required pursuant to Articles 32 to 35, the deductions pursuant to Article 36 and the application of the exemptions and alternatives laid down in Articles 48, 49 and 79.”

In practice, different interpretations of this provision have emerged. Our institution has consistently understood that CET1 items should be taken in full, before any adjustments, deductions or exemptions, and in line with the interpretation a) listed above. 

However, during external reviews (for example by auditors), a different reading has been applied: namely that CET1 items should be taken before the adjustments in Articles 32 to 35 but after applying the deductions in Article 36 and the exemptions and alternatives in Articles 48, 49 and 79. 

This divergence has created uncertainty and has a direct impact on the way the NSFR is reported, since external parties involved in the validation of regulatory ratios can effectively require the adoption of their interpretation.

We believe that this difference arises from the grammatical structure of the provision, which can be read either as applying the qualifier “before” to the entire list of references (Articles 32 to 35, 36, 48, 49 and 79), or only to the first part of the list (Articles 32 to 35).

From a regulatory consistency perspective, the first interpretation — i.e. CET1 items before any adjustments, deductions or exemptions — reflects more closely the underlying intent of the Net Stable Funding Ratio (NSFR) framework. The NSFR is designed to assess funding stability, and CET1 instruments provide permanent and stable funding regardless of their regulatory recognition after prudential filters or deductions.

This understanding is also aligned with the Basel NSFR standard, which explicitly states in paragraph 29 of BCBS 295 (Basel III: the Net Stable Funding Ratio, October 2014) that “Regulatory capital before the application of capital deductions is assigned a 100% ASF factor.”