NSFRi

NSFRi, short for Net Stable Funding Ratio index, is a proposed metric designed to assess the resilience of a financial institution's funding profile by extending the Basel III Net Stable Funding Ratio (NSFR) with a market-condition adjustment. While the NSFR measures the static stability of funding over a one-year horizon, NSFRi seeks to capture how funding markets and investor behavior can alter stability in stressed conditions.

The purpose of NSFRi is to provide a more dynamic assessment of funding risk. Banks and regulators may use NSFRi to identify vulnerabilities in funding structures, compare institutions beyond balance-sheet measures, and inform risk appetite, liquidity planning, and contingency strategies. It functions as a complement to the standard NSFR by highlighting sensitivity to market liquidity and funding costs that are not captured by the static ratio alone.

Calculation of NSFRi builds on the Basel-defined available stable funding (ASF) and required stable funding (RSF), but introduces a market-condition factor M derived from a composite of indicators such as funding spreads, liquidity indices, and market-implied funding availability. The adjustment can be incorporated multiplicatively or additively; for example NSFRi = NSFR × (1 + β(M − M0)), where M0 is a baseline and β calibrates sensitivity. Higher market stress raises M, increasing NSFRi to signal greater funding risk, while favorable conditions lower it. Data sources include internal funding profiles and public market data, with governance processes to ensure consistency and prevent manipulation.

Limitations and adoption remain points of discussion. NSFRi is not yet standardized and is primarily used in research, internal risk management, or pilot supervisory programs. Challenges include data availability, calibration, potential procyclicality, and uncertain regulatory acceptance.

NSFRi is intended as a supplementary tool rather than a replacement for the NSFR, offering a dynamic view of funding stability under market stress.