The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, approved the adoption of the net stable funding ratio for commercial and universal banks, an additional measure to strengthen lenders’ ability to withstand liquidity stress.
“The NSFR is a measure of the ability of a bank to fund its liquidity needs over one year. It complements the liquidity coverage ratio [LCR] which covers a shorter period of over 30 days in which a bank shall hold sufficient high-quality liquid assets that can be easily converted into cash to service their liquidity requirements,” the board said in a statement Monday.
It said both ratios were aimed at strengthening the ability of banks to withstand liquidity stress and promote resilience of the banking sector.
Recognizing the importance of proportionality in its supervision approach, the Bangko Sentral requires only bigger banks and select types of their subsidiaries to comply with the LCR and NSFR standards.
The smaller institutions comprising stand-alone thrift banks, rural banks, cooperative banks, and quasi-banks are subject to the minimum liquidity ratio requirement which better suit their simpler risk profile.