Basel III: calculating net stable funding ratio

The Bank of Russia worked out a draft regulation ‘On the Procedure for Systemically Important Credit Institutions to Calculate the Net Stable Funding Ratio (Basel III)’.

The document establishes the procedure for calculating the ratio and its minimum numerical value on the consolidated basis at the level of the banking group to which a systemically important credit institution is a parent company (N28 ratio) or on the standalone basis for systemically important credit institutions other than parent companies (N29 ratio).

The ratio regulates the liquidity risk of a banking group or a credit institution. The compliance with the ratio will ensure stability of funding sources in the amount sufficient to fund balance-sheet assets and off-balance-sheet liabilities. The draft regulation is to become effective on 31 March 2017. Next year, systemically important credit institutions will report to the Bank of Russia on the value of the ratio and its components on a quarterly basis for monitoring purposes.

The ratio is to be complied with and reported on a quarterly basis starting from 1 January 2018 in accordance with the timeframe stipulated by Basel III.