ECB research explores use of NSFR as macro-pru tool
Article suggests a ‘targeted approach’ could be effective
European Central Bank (ECB) research exploring the macro-prudential use of the net stable funding ratio (NSFR) finds it could be "beneficial from a financial stability perspective".
The NSFR was designed by the Basel Committee to limit the amount of unstable short-term funding banks could use to cover their core, often illiquid, assets.
It was designed as a micro-prudential standard, but a team at the ECB believes it could be modified and used as a macro-prudential tool to help prevent the build
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