NSFR Guidance

Summary

This document is technical guidance from the Guernsey Financial Services Commission explaining how banks should complete the Net Stable Funding Ratio (NSFR) module within the LCR/LMR regulatory return. It sets out the methodology for calculating available stable funding (ASF) and required stable funding (RSF) from an institution's balance sheet and off-balance sheet items, based on the Basel III NSFR standards.

• Scope and definitions: Banks must report NSFR using the same scope of application as for their LCR (or LMR), applying LCR definitions where referenced.
• Allocation of liabilities and capital: Banks must allocate capital and liabilities to specified ASF categories based on residual maturity and stability characteristics (e.g. retail deposits, corporate funding, secured borrowings, capital instruments).
• Allocation of assets: Banks must allocate balance sheet assets to specified RSF categories according to remaining maturity, whether encumbered or unencumbered, and if encumbered, the duration of encumbrance.
• Securities financing transactions: Guidance on which borrowed/lent securities to include or exclude from the balance sheet for NSFR purposes, and conditions under which such transactions may be measured net for a single counterparty.
• Derivatives treatment: Specific methodology for calculating NSFR derivative liabilities and receivables, including treatment of variation margin and netting agreements.
• Interdependent assets and liabilities: Banks may only apply 0% RSF/ASF treatment to interdependent asset and liability items with the Commission's prior agreement, subject to specified criteria.

The guidance is line-by-line and mirrors the structure of the return template, covering both on-balance sheet items (panels A and B) and off-balance sheet items such as liquidity and credit facilities, trade finance obligations, and non-contractual obligations like structured products and managed funds.

Key obligations

• Banks must report their NSFR using the same scope of application as used for the Liquidity Coverage Ratio (or Liquidity Mismatch Ratio, if applicable).
• Banks must allocate liabilities and capital reported on their balance sheet to the specified Available Stable Funding (ASF) categories.
• Banks must allocate assets reported on their balance sheet to specified Required Stable Funding (RSF) categories based on remaining maturity, encumbrance status, and duration of encumbrance.
• Banks must identify and separately report encumbered and unencumbered assets by residual maturity for each asset category.
• Banks must calculate NSFR derivative liabilities and assets using replacement cost methodology, deducting variation margin as specified, and applying eligible bilateral netting only where contractual conditions are met.
• Banks must obtain the Commission's prior agreement before applying 0% RSF/ASF treatment to interdependent asset and liability items, and must meet the specified criteria for such treatment.
• Securities financing transactions with a single counterparty may only be measured net if the netting conditions in Module 11 are satisfied.

Applies to

banks