Stable funding key to expansion, says Wolters Kluwer
03 August 2015 London
Image: Shutterstock
Banks should be cautious about expanding their business and should avoid an over-reliance on wholesale funding, according to Wolters Kluwer Financial Services.
Wolters Kluwer's whitepaper, Managing NSFR by Matching Conversion Ratios, looked in to the net stable funding ratio (NSFR), which is a part of Basel III, and encouraged institutions to conduct their own strategic analysis in line with the guidelines.
In the case of business expansion, it suggested that firms should develop their own retail and small businesses to control net funding, and highlighted the importance of sustainable funding, driven by effective asset and liability management.
According to the report, some banks struggled during the financial crisis because they failed to properly manage liquidity. The NSFR will mean banks have to maintain a stable fund profile in relation to their assets and activities, calculated by dividing available stable funding by the required stable funding.
Banks should already analyse their fund determinants and ratios before the NSFR comes in to effect in January 2018, added Wolters Kluwer.
Spark Wang Jun, a senior regulatory expert at Wolters Kluwer and author of the report, said: “Sustainable funding will be of vital significance going forward, especially for the financial institutions heavily reliant on wholesale funding.”
He added: “This is a key factor to be reconsidered during the decision making for the divestment of retail business units.”
Wolters Kluwer's whitepaper, Managing NSFR by Matching Conversion Ratios, looked in to the net stable funding ratio (NSFR), which is a part of Basel III, and encouraged institutions to conduct their own strategic analysis in line with the guidelines.
In the case of business expansion, it suggested that firms should develop their own retail and small businesses to control net funding, and highlighted the importance of sustainable funding, driven by effective asset and liability management.
According to the report, some banks struggled during the financial crisis because they failed to properly manage liquidity. The NSFR will mean banks have to maintain a stable fund profile in relation to their assets and activities, calculated by dividing available stable funding by the required stable funding.
Banks should already analyse their fund determinants and ratios before the NSFR comes in to effect in January 2018, added Wolters Kluwer.
Spark Wang Jun, a senior regulatory expert at Wolters Kluwer and author of the report, said: “Sustainable funding will be of vital significance going forward, especially for the financial institutions heavily reliant on wholesale funding.”
He added: “This is a key factor to be reconsidered during the decision making for the divestment of retail business units.”
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