On December 17, 2015, the EBA published a report, dated December 15, 2015, on the necessity for adding stable funding requirements to the EU regulatory capital requirements framework. The CRR requires the EBA to report to the Commission on whether and how it would be appropriate to ensure that banks and investment firms use stable sources of funding and to provide an assessment of the impact of a stable funding requirement on the businesses and risk profiles of firms in the EU, the financial markets, the economy and trade financing, as well as potential methodologies for determining the amount of stable funding available to and required by firms. The mandate was included in the CRR in response to the Basel Committee on Banking Supervision’s publication in 2010 of a net stable funding ratio (known as the NSFR) to be put in place by 2018. The NSFR requires firms to maintain a stable funding profile in relation to their assets and off-balance-sheet activities over a period of one year. The EBA considers that a net stable funding requirement should be implemented for banks in the EU and recommends that: (i) the net stable funding requirement should be applied on both a consolidated and solo basis, allowing for waivers and intragroup preferential treatment of banks that are part of a group; (ii) the Basel Committee’s calibration and definition for the NSFR generally work for the EU; (iii) the upcoming Basel Committee review on derivatives margining should be taken into account when the framework is developed; (iv) a minimum amount of available stable funding should be imposed; (v) the calibration of a net stable funding requirement for trade finance-related transactions needs to differentiate between off-balance-sheet commitments and on-balance-sheet exposures; (vi) the Basel standard on the treatment of interdependent assets and liabilities is suitable for fully matched funded amortized mortgage lending; (vii) central counterparties should be exempt from the net stable funding requirement; (viii) the Basel approach to centralized regulated savings as interdependent assets and liabilities should be adopted; (ix) residential loans guaranteed by banks or insurers should have an equal treatment; (x) smaller banks should be subject to the same requirements; and (xi) the net stable funding requirement should be equal to at least 100% on an ongoing basis.
The report is available at: http://www.eba.europa.eu/documents/10180/983359/EBA-Op-2015-22+NSFR+Report.pdf.