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NSFR guidelines set for release by yearend

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BSP
The facade of Bangko Sentral ng Pilipinas (BSP) in Roxas Boulevard, Manila is seen in this photo taken on September 21, 2014. — BW FILE PHOTO

By Melissa Luz T. Lopez, Senior Reporter

THE CENTRAL BANK is looking to release guidelines on the net stable funding ratio (NSFR) by yearend, with banks broadly seen capable of complying with the liquidity buffers prescribed as a global standard.

“Before the year ends, we’ll be coming out with a circular on this,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier told reporters.

Once in place, the NSFR will require universal and commercial banks to hold enough liquidity or “reliable” sources of funding for a one-year period so that they won’t rely too much on shorter-term funding.

“It’s a minimum acceptable level of stable funding over a one-year time frame to ensure that long-term assets are funded,” the central bank official added.

The new standard will be on top of the Liquidity Coverage Ratio (LCR), which requires big banks to hold high-quality and easily convertible assets to cover its projected net cash outflows over a 30-day period.




Both measures mandate big players to hold more than enough buffers that will allow them stay afloat even during episodes of a possible funding crunch. Among the assets considered to be “high-quality” are cash, funds placed with the BSP, and investments in government securities.

The BSP adopted the Basel 3 reform measures to improve risk management and prevent a repeat of the 2008 Global Financial Crisis, which was triggered by massive credit defaults that led to the collapse of big banks and caused widespread recession.

Much like the LCR, the central bank will implement the longer liquidity measure in phases with a pilot run next year and “full adoption” by 2019.

An initial review conducted by the BSP showed that banks are equipped with enough buffers to meet the requirements under the NSFR, Ms. Fonacier said.

The BSP has been introducing tighter regulatory standards under the Basel 3 regime since 2014, which include the 10% capital adequacy ratio; a framework for domestic systemically important banks; the 30-day liquidity coverage ratio; and the 5% leverage ratio.

Earlier this month, the central bank also issued fresh guidelines on liquidity risk management to ensure that financial firms can maintain enough money supply to meet “both expected and unexpected cash flows and collateral needs” for its day-to-day operations.

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