Question #12
Reading: Reading 11 Analysis of Financial Institutions
PDF File: Reading 11 Analysis of Financial Institutions.pdf
Page: 5
Status: Correct
Correct Answer: B
Question
Under the Basel III Regulatory Framework, the Net Stable Funding Ratio (NSFR) is most likely to be calculated as:
Answer Choices:
A. highly liquid assets ÷ available stable funding
B. available stable funding ÷ required stable funding
C. required stable funding ÷ expected cash outflows
Explanation
The Net Stable Funding Ratio (NSFR) is the percentage of a bank's required stable funding
that must be sourced from available stable funding. The numerator (available stable
funding) is a function of the composition and maturity of a bank's funding sources (i.e.,
capital and deposits and other liabilities), while the denominator (required stable funding)
is a function of the composition and maturity of a bank's asset base.