09. NSFR: the ASF and RSF factors that weight every euro of funding

A bank can hold plenty of funding and still fail the liquidity ratio. What matters is not how much it has, but how stable it is.

The Net Stable Funding Ratio compares two weighted sums:

➡️ Available Stable Funding (ASF) / Required Stable Funding (RSF), and it must stay above 100%.

The weights are the whole point.

On the funding side, ASF rewards money that stays. Capital and debt over one year count at 100%. Stable retail deposits at 95%. Short-term money borrowed from other banks counts for 0%, because in a stress it leaves first.

On the asset side, RSF measures how much stable funding each asset needs. Cash and top government bonds need almost nothing. A qualifying residential mortgage needs 65%. Non-performing and other illiquid assets need 100%.

Put the two sides together and the ratio forces long, illiquid lending to be matched by long, sticky funding. It is the 2008 maturity mismatch, turned into a single number.

Anyone who has sat in a liquidity discussion knows it: the debate is never about the formula, it is always about the weights.

Full breakdown in the slides below.

#BankingRegulation #Liquidity