NSFR Calculator
Table of contents
What is NSFR? NSFR meaningNSFR calculator β How to calculate NSFRHow to interpret NSFR?FAQsWith this NSFR calculator, you can easily calculate the net stable funding ratio. The net stable funding ratio helps you to assess a bank's ability to handle longterm obligations through sustainable and secured funding.
The following article will help you understand what NSFR is and how to calculate it using the NSFR formula. We will also use some net stable funding ratio examples to better help you to understand the meaning of the metric. Now, let's start by discussing the concept!
What is NSFR? NSFR meaning
The net stable funding ratio, or the Basel III net stable funding ratio, is widely used to regulate the banking sector by the Basel committee under the Basel III accord. The metric focuses on measuring if the bank's funding is secured enough to withstand longterm market disruptions.
Compared to the liquidity coverage ratio (LCR), which focuses on a bank's ability to withstand shortterm liquidity risks, the net stable funding ratio measures the longterm liquidity risks. You can try out our LCR calculator and risk calculator to understand more on this topic. The ratio was introduced after the 2008 financial crisis with the aim of restricting excess lending by the banks and encouraging banks to lean towards more secured funding.
NSFR calculator β How to calculate NSFR
Now that we understand the NSFR meaning, let's look at the NSFR calculation.
Take Bank Alpha as the Basel III net stable funding ratio example. It is a US bank that reports the following numbers:
 Regulatory capital:
$10,000,000
;  Stable demand deposits:
$15,000,000
;  Less stable demand deposits:
$10,000,000
;  Funding from corporations:
$17,000,000
; and  Required stable funding:
$35,000,000
.
You need to carry out three steps to calculate NSFR
.

Calculate the available stable funding (ASF).
Available stable funding, or
ASF
, is the stable source of money the bank has. As different sources of money have different stability, they are each assigned anASF
factor. The higher theASF
factor, the more stable the source of money is. TheASF
factor for each source of money is as follows: ASF factor of regulatory capital: 100%;
 ASF factor of stable demand deposits: 95%;
 ASF factor of less stable demand deposits: 90%; and
 ASF factor of funding from corporation: 50%.
Using the ASF factors above, you can calculate the
ASF
using the formula below:ASF = reg. cap. + stable dep. Γ 0.95 + less stable dep. Γ 0.9 + cop. fund. Γ 0.5
where:
reg. cap.
β Regulatory capital;stable dep.
β Stable demand deposits;less stable dep.
β Less stable demand deposits; andcop. fund.
β Funding from corporations.
In this example, The
ASF
of Bank Alpha is$10,000,000 + $15,000,000 Γ 0.95 + $10,000,000 Γ 0.9 + $17,000,000 Γ 0.5 = $41,750,000
.Our NSFR calculator allows you to find
ASF
by opening the first section of the calculator: Calculate Available stable funding. 
Determine the required stable funding.
We need to calculate the
required stable funding
next. Therequired stable funding
is the number of sources of money needed by the bank. This number is determined by the government and its regulators. In our example, Bank Alpha'srequired stable funding
is$35,000,000
. 
Calculate the NSFR.
Finally, it is time for us the calculate the Basel III net stable funding ratio. We calculate this metric using the NSFR definition:
NSFR = ASF / required stable funding
Thus, Bank Alpha's
NSFR
is$41,750,000 / $35,000,000 = 119.29%
.
How to interpret NSFR?
After understanding the NSFR formula, it is time to understand how to interpret it.
The Basel III Accord, published by the Basel Committee on Banking Supervision (BCBS), says that every bank is required to have an NSFR of at least 100%. This indicates that the institution has enough stable funding to meet the required funding for the next 12 months.
We use this metric to make sure that banks out there will not take on excessive risk just to get more profit. It encourages banks to play safe and secure stable funding sources so that when a financial crisis happens, the bank will have the ability to weather it. Please feel free to check out our profit calculator.
What is a good NSFR?
In general the higher the NSFR, the better, as it means the bank has more available stable funding compared to its required funding. According to the Basel III Accord, every bank needs to have an NSFR of at least 100%.
Can the NSFR be negative?
No, NSFR can never be negative as that means the bank has negative funding, which will mean the bank is bankrupt. However, mathematically speaking, a bank can have an NSFR of 0%
, which will mean that the bank has no stable funding.
What is the difference between NSFR and LCR?
NSFR focuses on assessing longterm risk whereas LCR focuses on shortterm risks. Moreover, NSFR measures a bank's funding stability, while LCR measures its liquidity needs.
Can NSFR be applied to another industry?
Yes, technically speaking, NSFR can be applied to all industries. However, it is most relevant to banks and insurance companies since these companies are the custodians of people's money and are most affected by the market and economic conditions.