Bank Negara to implement NSFR for banks in 2019

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KUALA LUMPUR (Sept 28): Bank Negara Malaysia (BNM) said today it intends to implement the net stable funding ratio (NSFR) — a liquidity standard under Basel III — for banking institutions “no earlier than Jan 1, 2019”.

The NSFR seeks to measure the proportion of a bank’s long-term assets which are funded by long-term stable funding.

It requires banking institutions to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities.

“This standard complements the liquidity coverage ratio (LCR) which has been phased in since 2015,” BNM said in a statement.

It noted that there has been considerable uncertainty on the global front in terms of meeting the internationally agreed timeline of Jan 1, 2018.

“Bank Negara has considered the international nature of Malaysian banking institutions’ operations and the potential impact on domestic competitiveness against the immediate need for implementation of the standard.

"To this end, the bank intends to implement the NSFR at no earlier than Jan 1, 2019, ideally with greater certainty or harmonisation among key markets. This is not expected to affect the resilience of the Malaysian banking system,” it said.

BNM emphasised that banking institutions here do have sufficient safeguards in managing liquidity risk, supported by strong liquid asset buffers, more diversified funding profiles and robust liquidity risk management practices.

As at June 30 2017, the banking system LCR stood at 141% whilst the NSFR is estimated at above 100%.

BNM assistant governor Marzunisham Omar, in a media briefing this evening, said based on preliminary and indicative data, the NSFR industry average was 107%.

More than three-quarters of banks had NSFR of above 100%, which is the minimum requirement that will kick in only in 2019. (A higher NSFR indicates a more stable funding profile.) “So, our banks have a lot of buffer currently,” he highlighted.

Jurisdictions that are keeping to the Jan 1, 2018 timeline include Australia, Singapore, Indonesia and Hong Kong, while those that have delayed implementation include the US, the European Union and Canada. China, Japan and Thailand are among those that have yet to confirm their timeline.

Meanwhile, BNM, which issued an exposure draft on NSFR, is inviting public feedback on the proposed regulatory requirements. Banking institutions have two months, up to November 2017, to submit feedback.