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The Impact of Net Stable Funding Ratio on Bank Performance and Risk Around the World

Author

Listed:
  • Bowo Setiyono

    (Universitas Gadjah Mada)

  • Ahmad Maulin Naufa

    (Universitas Gadjah Mada)

Abstract

This study examines whether liquidity, as measured by net stable funding ratio (NSFR), impacts bank performance and risk. Based on an annual panel data set consisting of 2,909 banks from 127 countries, we find that NSFR reduces both performance and risk. These results are uniquely different in the robustness analysis under various settings (non-linear relationships, high versus low NSFR, and conventional versus Islamicbanks). Overall, NSFR implementation brings benefits in the form of risk reduction rather than performance improvement to banks around the world.

Suggested Citation

  • Bowo Setiyono & Ahmad Maulin Naufa, 2020. "The Impact of Net Stable Funding Ratio on Bank Performance and Risk Around the World," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(4), pages 543-564, December.
    • Handle: RePEc:idn:journl:v:23:y:2020:i:4e:p:543-564
    DOI: https://doi.org/10.21098/bemp.v23i4.1166
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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