The Net Stable Funding Ratio and banks’ participation in monetary policy operations: some evidence for the euro area
AbstractBased on a review of the analytical underpinnings of the effects of the NSFR on banks’ choices, this paper attempts to relate banks’ strategies to developments in the value of the ratio in the euro area. In spite of a not-so-near implementation date, the evidence is that the NSFR already matters for banks’ choices, and it might be more relevant as a decision variable than alternative leverage indicators. As part of a convergence process towards the 100 per cent threshold, we estimate that the ECB’s 3-year LTROs have raised the available stable funding by €429 billion as of June 2012 for the sample banks with a shortfall and that the NSFR may affect loans to the economy. In view of the phasing-in of the Basel III liquidity standards, the evidence suggests that, when evaluating non-standard monetary policy measures, central banks should also take into account their impact on the fulfilment of the NSFR and the possible cliff effects related to their expiration.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 195.
Date of creation: Sep 2013
Date of revision:
Basel III; liquidity regulation; central bank operations;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-25 (All new papers)
- NEP-BAN-2013-10-25 (Banking)
- NEP-CBA-2013-10-25 (Central Banking)
- NEP-EEC-2013-10-25 (European Economics)
- NEP-MAC-2013-10-25 (Macroeconomics)
- NEP-MON-2013-10-25 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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485, Federal Reserve Bank of New York.
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- Patrick Slovik & Boris Cournède, 2011. "Macroeconomic Impact of Basel III," OECD Economics Department Working Papers 844, OECD Publishing.
- Ragacs, Christian & Schmitz, Stefan W. & Kopp, Emanuel, 2010. "The Economic Impact of Measures Aimed at Strengthening Bank Resilience – Estimates for Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 20.
- Gaston Giordana & Ingmar Schumacher, 2011. "The Impact of the Basel III Liquidity Regulations on the Bank Lending Channel: A Luxembourg case study," BCL working papers 61, Central Bank of Luxembourg.
- TÃ¼mer Kapan & Camelia Minoiu, 2013. "Balance Sheet Strength and Bank Lending During the Global Financial Crisis," IMF Working Papers 13/102, International Monetary Fund.
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