The net stable funding ratio: theoretical background and analysis of the Spanish banking sector

Abstract

This paper studies the Net Stable Funding Ratio (NSFR) both from a regulatory and more theoretical approach, and also from an empirical perspective focusing on the Spanish banking sector. A methodology for the estimation of the NSFR based on publicly available information is proposed, and the level of the ratio as of 2013 and 2015 across the main Spanish banks is estimated. We further analyse the specific balance sheet rearrangement measures undertaken by Spanish banks so as to enhance the NSFR, with a special focus on credit supply and deposits. Our estimates imply that the average NSFR as of December 2015 is circa 106%, and half of the sample banks meet the 100% threshold. Whilst the findings of the paper show a disparity of reallocation methods across banks, adjustment towards the NSFR does not systematically imply that banks either curtailed lending or increased deposits.