October 20, 2020
Agencies issue final rule to strengthen resilience of large banks
- Board of Governors of the Federal Reserve System
- Federal Deposit Insurance Corporation
- Office of the Comptroller of the Currency
For release at 4:00 p.m. EDT
The federal bank regulatory agencies on Tuesday finalized a rule strengthening the resilience of large banks by requiring them to maintain a minimum level of stable funding over a one-year period.
The net stable funding ratio, or NSFR, final rule will require large banks to maintain a minimum level of stable funding, relative to each institution’s assets, derivatives, & commitments. As a result, the NSFR rule will support the ability of banks to lend to households & businesses in both normal & adverse economic conditions by reducing liquidity risk & enhancing financial stability.
The NSFR’s requirements are tailored to the risks of large banks with the most stringent requirements applying to the largest & most complex firms & less stringent requirements applying to firms with less risk. The NSFR complements the agencies’ liquidity coverage ratio rule, which focuses on short-term liquidity risks.
The final rule is generally similar to the proposal from May 2016 & includes several changes based on further analysis & public input on the proposal. In particular, the calibration is now tailored to be consistent with the Economic Growth, Regulatory Reform, & Consumer Protection Act, & matches the tailored calibration of the LCR. Additionally, the funding requirements for certain assets were modified to better reflect their risks & support the stability of certain funding markets.
The final rule is effective on July 1, 2021. Holding companies & any covered nonbank companies regulated by the Federal Reserve will be required to publicly disclose their NSFR levels semiannually beginning in 2023.
October 20, 2020