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Abstract: 

On June 1, 2016, the federal banking agencies published a proposed rule, to be effective January 1, 2018, that would require large banks to maintain a minimum Net Stable Funding Ratio (NSFR) over a 30-day horizon. The proposed rule adds to a line of recent liquidity measures aimed at improving the stability of the largest U.S. banking organizations and the U.S. financial markets as a whole. If adopted, the proposed NSFR rule likely would achieve one of its goals—to increase the self-sufficiency of the banking organizations subject to it. But it is uncertain whether the proposed rule would achieve its other goal—that is, to improve overall market liquidity. The industry may be able to look to more concrete guidance once the agencies have considered comments received and the NSFR rule is finalized in the coming months.

Keywords: NSFR; stable funding; funding; liquidity; systemically important banking organizations

Affiliations:  1: Morrison & Foerster LLP; 2: Morrison & Foerster LLP.