Interesting Times for Deposits Managers!


At the end of October 2014, the Basel Committee on Banking Supervision (Bank for International Settlements) published its final version of the Net Stable Funding Ratio (NSFR) for banks under Basel III (

The document sets out the measures, standards, and timelines for implementation of NSFR in a reasonably clear manner that supports the gradual reduction of reliance of banks on short term wholesale funding.

The implementation of LCR (Liquidity Coverage Ratio) and NSFR (Net Stable funding Ratio) over the coming years will ensure prudent management of funding to meet both commercial objectives and sensible liquidity objectives to safeguard against future shocks in the financial system. While the LCR measure will be phased in between now and 2019, the NSFR measure will require banks to reach minimum standards by January 1st 2018.

The publication of the NSFR measures comes after a period of consultation and impact-testing, and it reflects changes to unintended consequences. As a result, clear definitions and measures have been set out around defining both Available Stable Funding (ASF) and Required Stable Funding (RSF) in the calculation of NSFR for banks (see below).

While there were no particular surprises in this publication, the impact on deposits management of banks is key. While most of Europe currently operates in a historically low interest rate environment, the next few years will be interesting for deposits for a number of reasons:

  1. Interest rates will increase in time to support economic recovery across Europe, which will see the transition of liquid demand funds into longer-term, fixed-rate accounts as deposit rate differentials return to normality.
  2. Banks will need to increase their levels of stable funding to support lending to the growing economies, which will also see rate differentials being more prominent between short-term liquid deposits and longer-term fixed deposits. This will be particularly prevalent in non-retail type deposits where the NSFR impact will be greater.
  3. Banks will be required to meet minimum standards by January 1st 2018.

Nomis has seen that most of the focus has been on the implementation of LCR standards to this point. With the final publication of NSFR standards, the focus on growing stable funding will become more acute, particularly as economies now begin to return to growth and thus lending markets begin to re-invigorate.

Leveraging bank data and using this data to optimise pricing in deposits portfolios, to strategically design right fit “NSFR” products, and to minimise the opportunity costs of less stable funds will be a key challenge to banks.

Interesting times ahead!

Bonus content...Measures and Categories of ASF and RSF in the final Basel Committee paper on NSFR

The paper sets out the following summary of categories and “factors” for ASF (click to enlarge):


Similarly, it sets out the measures and categories for RSF as follows (click to enlarge):



About The Author

Damian is a career banker with more than 25 years of experience. He spent most of his career with Bank of Ireland where he held a number of senior roles, including Head of Deposits and Current Accounts, Head of SME Banking and Head of Customer Management and Customer Analytics. At Nomis, Damian is Managing Director responsible for the APAC region.