An acronym for net stable funding ratio; the ratio of available stable funding, ASF, (at disposal of an entity) to its required stable funding (RSF) over a one year period:
NSFR = Total available stable funding/ total required stable funding
NSFR = total ASF/ total RSF
The ratio has to be larger than, or at least equal to, 100%.
It aims to support financial stability by helping banks and financial institutions to ensure that funding shocks do not significantly drive up the probability of distress at individual level, and hence a potentially higher systemic risk. The ratio is figured out under a stressed scenario. Available stable funding includes items such as equity capital, preferred stock with a maturity over one year, and liabilities with an expected maturity exceeding one year.
