Net Stable Funding Ratio (NSFR) Calculator
Enter four kinds of funding and the required stable funding to find the net stable funding ratio (NSFR).
Updated
Net Stable Funding Ratio (NSFR) Calculator
Our Net Stable Funding Ratio Calculator shows whether a bank pays for its assets with funding that is likely to stay in place for a year. Enter regulatory capital, stable deposits, less stable deposits, funding from corporations and the required stable funding. It weights each kind of funding with its Basel III factor and gives the NSFR as a percentage, the available stable funding, the surplus or shortfall against the 100% minimum and the average factor across the funding you entered. Bank treasury teams, risk analysts, auditors and finance students use it for a quick check.
Quick answer
The net stable funding ratio is available stable funding ÷ required stable funding × 100: 23,000,000 of available stable funding and 20,000,000 of required stable funding give 23,000,000 ÷ 20,000,000 × 100 = 115%.
- Minimum: Basel III requires an NSFR of at least 100% at all times.
- Top line (ASF): capital and liabilities, each multiplied by a factor from 0% to 100% for how likely it is to stay for a year.
- Bottom line (RSF): assets, each multiplied by a factor from 0% to 100% for how hard it is to sell or run off within a year.
- Time span: one year, compared with 30 days for the liquidity coverage ratio.
What Is the Net Stable Funding Ratio?
The net stable funding ratio (NSFR) is a bank funding rule from the Basel III framework. It compares the funding a bank can rely on for the next year with the funding its assets need over the same year.
- ASF (available stable funding): the part of a bank's capital and liabilities that is expected to stay with the bank for at least one year.
- RSF (required stable funding): the amount of stable funding the bank's assets and off-balance sheet commitments call for, based on how long they last and how easily they can be sold.
- Minimum: 100%, so that available stable funding is at least equal to required stable funding.
The aim is to stop banks from paying for long-term loans with short-term borrowing that can vanish in a crisis. A bank with an NSFR of 100% or more has enough steady funding behind its assets to last a year without new borrowing from the markets.
How to Calculate the NSFR
A bank has 5,000,000 of regulatory capital, 12,000,000 of stable deposits, 4,000,000 of less stable deposits and 6,000,000 of funding from corporations. Its required stable funding is 20,000,000. First weight each kind of funding:
+ Stable deposits × 95%
+ Less stable deposits × 90%
+ Corporate funding × 50%
+ 3,600,000 + 3,000,000
= 23,000,000
= 115%
- Weight the funding. 5,000,000 × 100% = 5,000,000. 12,000,000 × 95% = 11,400,000. 4,000,000 × 90% = 3,600,000. 6,000,000 × 50% = 3,000,000.
- Add the weighted amounts. 5,000,000 + 11,400,000 + 3,600,000 + 3,000,000 = 23,000,000 of available stable funding.
- Divide by required stable funding and multiply by 100. 23,000,000 ÷ 20,000,000 × 100 = 115%.
The bank has 3,000,000 more stable funding than it needs. Of the 27,000,000 of funding entered, 23,000,000 counts, an average factor of about 85.19%.
ASF Factors: How Much of Each Funding Counts
The calculator uses four fixed factors from the Basel III standard. The full standard has five groups:
| Funding | ASF factor |
|---|---|
| Regulatory capital, and borrowing with one year or more left to run | 100% |
| Stable deposits from retail and small business customers | 95% |
| Less stable deposits from retail and small business customers | 90% |
| Funding from non-financial corporations with under one year left, and operational deposits | 50% |
| Other liabilities, such as short-term funding from other financial institutions | 0% |
Stable deposits are demand deposits and term deposits of under one year that are fully covered by deposit insurance and held by customers with an established relationship or in an everyday transaction account. Less stable deposits are the other retail and small business deposits, for example balances above the insured limit. Funding in the 0% group adds nothing to the top line, so leave it out of the calculator.
How Required Stable Funding Is Worked Out
The last field asks for required stable funding as one figure. To find it, multiply each asset by its RSF factor and add the results. Liquid, short-term assets need little stable funding. Long-term and hard-to-sell assets need a lot. A bank with 33,400,000 of assets might look like this:
| Asset × RSF factor | RSF |
|---|---|
| Cash and central bank reserves 2,000,000 × 0% | 0 |
| Top-rated government bonds 4,000,000 × 5% | 200,000 |
| Loans to companies, under one year 6,000,000 × 50% | 3,000,000 |
| Home mortgages, one year or more 8,000,000 × 65% | 5,200,000 |
| Other loans, one year or more 12,000,000 × 85% | 10,200,000 |
| Fixed assets and other assets 1,400,000 × 100% | 1,400,000 |
| Required stable funding | 20,000,000 |
This is the 20,000,000 used in the main example. The bank funds its 33,400,000 of assets with the 27,000,000 entered in the calculator plus 6,400,000 of short-term borrowing from other financial institutions, which has a 0% ASF factor. The 65% factor is for mortgages with a risk weight of 35% or less. Undrawn credit lines that the bank has promised also add to RSF, at 5% of the undrawn amount.
NSFR Examples
| ASF ÷ RSF | NSFR |
|---|---|
| Above the minimum 23,000,000 ÷ 20,000,000 | 115% |
| Exactly at the minimum 4,000,000 ÷ 4,000,000 | 100% |
| Below the minimum 11,450,000 ÷ 12,000,000 | 95.42% |
Exactly at the minimum. With 1,000,000 of capital, 2,000,000 of stable deposits, 1,000,000 of less stable deposits and 400,000 of corporate funding, ASF is 1,000,000 + 1,900,000 + 900,000 + 200,000 = 4,000,000. Against 4,000,000 of required stable funding the NSFR is 100%.
Below the minimum. With 2,000,000 of capital, 5,000,000 of stable deposits, 3,000,000 of less stable deposits and 4,000,000 of corporate funding, ASF is 2,000,000 + 4,750,000 + 2,700,000 + 2,000,000 = 11,450,000. Against 12,000,000 of required stable funding the NSFR is about 95.42%, a shortfall of 550,000.
What Is a Good NSFR?
| NSFR | What it means |
|---|---|
| Under 100% | Part of the bank's long-term or hard-to-sell assets is paid for with funding that may not last the year. This is below the Basel III minimum. |
| 100% | Stable funding matches the need exactly. The minimum is met with no buffer. |
| Over 100% | Stable funding is larger than the need, so the bank has room for some deposits to leave or for lending to grow. |
The regulatory line is 100%, and the standard says it must be met on an ongoing basis. Banks usually hold a margin above it, because deposits move from day to day. A very high figure is not free: long-term borrowing and capital cost more than short-term funding, so extra stable funding lowers the margin a bank earns on its lending.
Two Ways to Raise the NSFR
A bank can lift the ratio from either side.
Make the funding more stable. In the main example, suppose the bank replaces 4,000,000 of its corporate funding with stable retail deposits. That funding moves from a 50% factor to a 95% factor:
= 1,800,000 more ASF
= 124%
Hold assets that need less funding. Suppose it swaps 2,000,000 of long-term loans, with an 85% factor, for government bonds with a 5% factor:
= 1,600,000 less RSF
= 125%
To find the stable funding needed for a target, multiply the target by RSF. A 110% target with 20,000,000 of required stable funding needs 22,000,000 of ASF.
Why Banks Need Stable Funding
Banks borrow short and lend long. A deposit can be withdrawn tomorrow, while a mortgage may run for 25 years. This gap is called maturity mismatch, and it is normal banking. It becomes dangerous when a bank leans heavily on funding that has to be renewed every few days or weeks, such as borrowing from other financial institutions. In the 2007 to 2009 financial crisis, that kind of funding dried up almost overnight, and banks that depended on it could not replace it.
The NSFR puts a limit on the gap. It works beside the liquidity coverage ratio, the other Basel III liquidity rule. The liquidity coverage ratio asks whether a bank has enough liquid assets to get through 30 days of stress. The NSFR asks whether the whole balance sheet is funded in a way that can last a year. For the 30-day test, see the liquidity coverage ratio calculator.
When the NSFR Came Into Force
The Basel Committee published the final NSFR standard in October 2014, to apply as a minimum from 1 January 2018. Each country writes it into its own rules, and many did so later:
- United States: the banking agencies issued the final rule in October 2020. It took effect on 1 July 2021 and applies to large banking organizations.
- European Union: a binding 100% minimum has applied since 28 June 2021 under the revised Capital Requirements Regulation.
- United Kingdom: the NSFR has applied since 1 January 2022.
National versions can use different factors for some items, so a reported figure has to follow the rule in the bank's own country.
What This Calculator Does and Does Not Do
This calculator is a simplified version of the rule, good for study, planning and sense checks.
- Four kinds of funding. It covers the 100%, 95%, 90% and 50% groups. Long-term borrowing with a year or more left to run also has a 100% factor, so add it to the regulatory capital field.
- Fixed factors. The factors are the Basel III ones and cannot be changed.
- RSF as one figure. Work out required stable funding first, as shown above, and enter the total.
- No derivatives or linked items. The special treatment of derivatives and of interdependent assets and liabilities is left out.
Common Mistakes
- Using total liabilities as ASF. Each kind of funding counts only up to its factor, and some counts for nothing.
- Using total assets as RSF. Assets are weighted too. Cash needs no stable funding, while fixed assets need 100%.
- Entering weighted amounts. Type the full balance of each kind of funding. The calculator applies the factors.
- Treating all deposits as stable. Only insured deposits from retail and small business customers with a relationship or a transaction account get 95%.
- Mixing up the two Basel ratios. The NSFR looks one year ahead at funding. The liquidity coverage ratio looks 30 days ahead at liquid assets.
Key Terms
- NSFR
- Net stable funding ratio: available stable funding ÷ required stable funding × 100.
- ASF
- Available stable funding, the capital and liabilities expected to stay for a year.
- RSF
- Required stable funding, the stable funding a bank's assets and commitments call for.
- ASF factor
- The share of a funding source that counts as stable, from 0% to 100%.
- RSF factor
- The share of an asset that must be backed by stable funding, from 0% to 100%.
- Maturity mismatch
- The gap between short-term funding and the longer-term assets it pays for.
How to Use the Net Stable Funding Ratio (NSFR) Calculator
- Enter the four kinds of funding. Type regulatory capital, stable deposits, less stable deposits and funding from corporations, such as 5,000,000, 12,000,000, 4,000,000 and 6,000,000. Enter the full balances, and 0 for any the bank does not have. Commas are fine.
- Enter the required stable funding. Type the total required stable funding (RSF), such as 20,000,000. It is the sum of each asset multiplied by its RSF factor.
- Read and copy the result. The NSFR appears as you type, with the working, the available stable funding, the surplus or shortfall, the average ASF factor and whether the 100% minimum is met. Press Copy to copy it, or Clear or Esc to start again.
Example: 2,000,000 of capital, 5,000,000 of stable deposits, 3,000,000 of less stable deposits, 4,000,000 of corporate funding and 12,000,000 of required stable funding. Available stable funding is 11,450,000, so the result is about 95.42%, a shortfall of 550,000 against the 100% minimum.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
What is the formula for the net stable funding ratio?
NSFR = available stable funding ÷ required stable funding × 100. Available stable funding is each kind of capital and liability multiplied by its ASF factor, and required stable funding is each asset multiplied by its RSF factor.
What is the NSFR if available stable funding is 23,000,000 and required stable funding is 20,000,000?
It is 115%, because 23,000,000 ÷ 20,000,000 × 100 = 115%. The bank has 3,000,000 more stable funding than the 100% minimum needs.
What is the minimum net stable funding ratio?
Under Basel III the minimum is 100%, and it has to be met on an ongoing basis. The Basel standard set 1 January 2018 as the start date, and countries brought it in through their own rules.
What ASF factors does this calculator use?
It counts regulatory capital at 100%, stable deposits at 95%, less stable deposits at 90% and funding from corporations at 50%. These are the Basel III factors for those four groups.
How do you calculate available stable funding?
Multiply each kind of funding by its factor and add the results. For example, 5,000,000 × 100% + 12,000,000 × 95% + 4,000,000 × 90% + 6,000,000 × 50% = 23,000,000.
What does an NSFR below 100% mean?
It means the bank has less stable funding than its assets call for over the next year. For example, 11,450,000 ÷ 12,000,000 × 100 is about 95.42%, a shortfall of 550,000. The bank needs more stable funding or assets that need less of it.
How can a bank improve its NSFR?
It can raise available stable funding with more capital, more retail deposits or longer-term borrowing. It can also lower required stable funding by holding more cash and government bonds and fewer long-term or hard-to-sell assets.
What is the difference between ASF and RSF?
ASF is on the funding side of the balance sheet: capital and liabilities weighted by how likely they are to stay for a year. RSF is on the asset side: assets and commitments weighted by how much stable funding they need.
Is the Net Stable Funding Ratio Calculator free?
Yes. It is completely free, needs no sign-up, and can be used as many times as you like.
Sources
- Bank for International Settlements. Basel III: the net stable funding ratio.
- Bank for International Settlements. Net Stable Funding Ratio (NSFR), Executive Summary.
- Bank for International Settlements. Basel Framework: Net stable funding ratio.
- Federal Reserve Board. Agencies issue final rule to strengthen resilience of large banks.
- Office of the Comptroller of the Currency. Net Stable Funding Ratio: Final Rule.
- WallStreetMojo. Net Stable Funding Ratio (NSFR).
Try our Net Stable Funding Ratio Calculator to see whether stable funding covers what a bank needs over a year.