If it is implemented as expected, the NSFR would require banks to maintain a stable funding profile for their assets, both on and off balance sheets. The NSFR seeks to complement the already finalized liquidity coverage ratio (LCR), by requiring banks to hold liquid assets to offset risky ones with similar maturities.
While the LCR, set to go into effect in January 2017, focuses on short-term stress scenarios, the NSFR seeks to mitigate risks over a longer time horizon, lawyers said in a briefing on upcoming capital rules at ABS Vegas on Sunday.
US regulators have not yet proposed an NSFR rule, but Chapman and Cutler partner Rachel George said she expected the US to implement the requirement.
The LCR is set to penalize banks that hold ABS, MBS and RMBS on their books, by requiring them to hold an offsetting amount of high quality liquid assets (HQLA) – a metric defined by regulators.
“The only types of securitization exposures that qualify for HQLA are bonds issued by Ginnie [Mae], Fannie [Mae] and Freddie [Mac],” George said. “There is industry advocacy on that point, but that is the status quo.”