The goals of the Basel III Net Stable Funding Ratio, a long-term liquidity measurement, have already been met by the US financial system, and the federal banking agencies would see no benefit by finalizing the NSFR rule, American Bankers Association President and CEO Rob Nichols wrote in a letter today to Federal Reserve Vice Chairman for Supervision Randal Quarles. Nichols cautioned that implementing the proposed NSFR would impose “significant needless costs” on investors and market participants, as well as drawing regulatory attention away from more important issues.
Nichols noted that the Liquidity Coverage Ratio, the Total Loss-Absorbing Capacity rule, the G-SIB surcharge and Regulation YY effectively achieve the NSFR’s goal of maintaining a stable funding profile for banks over time. “With all these other rules, monitoring, and processes already in place to limit short-term funding reliance, encourage stable funding, and ensure that banks employ effective liquidity risk management practices, the additional marginal benefits of implementing the NSFR are hard to discern,” he wrote.