CMA Final · Risk Management in Banking and Insurance · Liquidity Risk Management
Under the Basel III framework, the Net Stable Funding Ratio (NSFR) is designed mainly to address which of the following?
NSFR addresses structural funding mismatches. It requires banks to hold available stable funding at least equal to required stable funding over a one-year horizon, promoting longer-term resilience. The 30-day stress horizon belongs to the Liquidity Coverage Ratio, not the NSFR.
- AShort-term liquidity stress over a 30-day horizon
- BStructural funding mismatches by requiring stable funding over a one-year horizonCorrect
- CLeverage arising from off-balance sheet exposures
- DCredit concentration to a single borrower group
Explanation
NSFR compares available stable funding with required stable funding over a one-year horizon and must be at least 100%. The 30-day stress horizon belongs to the Liquidity Coverage Ratio, so option A describes LCR, not NSFR.
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