Net Stable Funding Ratio

The Net Stable Funding Ratio (NSFR) is a financial metric that measures a bank's stability by comparing its available stable funding to its required stable funding over a one-year horizon. In simpler terms, it ensures that banks have enough long-term funding to cover their long-term assets, helping them withstand financial stress. This ratio promotes safer lending practices and aims to prevent bank failures by requiring institutions to maintain a healthier balance between their funding sources and loan commitments. The NSFR is part of global banking regulations to enhance the overall stability of the financial system.