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The Net Stable Funding Ratio and banks� participation in monetary policy operations: some evidence for the euro area

  • Antonio Scalia


    (Bank of Italy)

  • Sergio Longoni


    (Bank of Italy)

  • Tiziana Rosolin


    (Bank of Italy)

Based 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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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 195.

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Date of creation: Sep 2013
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Handle: RePEc:bdi:opques:qef_195_13
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  1. Patrick Slovik & Boris Cournède, 2011. "Macroeconomic Impact of Basel III," OECD Economics Department Working Papers 844, OECD Publishing.
  2. Darracq-Paries, Matthieu & De Santis, Roberto A., 2015. "A non-standard monetary policy shock: The ECB's 3-year LTROs and the shift in credit supply," Journal of International Money and Finance, Elsevier, vol. 54(C), pages 1-34.
  3. Kapan, Tümer & Minoiu, Camelia, 2013. "Balance sheet strength and bank lending during the global financial crisis," Discussion Papers 33/2013, Deutsche Bundesbank, Research Centre.
  4. Paolo Angelini & Laurent Clerc & Vasco Cúrdia & Leonardo Gambacorta & Andrea Gerali & Alberto Locarno & Roberto Motto & Werner Roeger & Skander Van den Heuvel & Jan Vlček, 2015. "Basel III: Long-term Impact on Economic Performance and Fluctuations," Manchester School, University of Manchester, vol. 83(2), pages 217-251, 03.
  5. Emanuel Kopp & Christian Ragacs & Stefan W. Schmitz, 2010. "The Economic Impact of Measures Aimed at Strengthening Bank Resilience – Estimates for Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 20, pages 86-114.
  6. 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.
  7. Dietrich, Andreas & Hess, Kurt & Wanzenried, Gabrielle, 2014. "The good and bad news about the new liquidity rules of Basel III in Western European countries," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 13-25.
  8. Morten Bech & Todd Keister, 2012. "On the liquidity coverage ratio and monetary policy implementation," BIS Quarterly Review, Bank for International Settlements, December.
  9. Pablo Federico & Francisco F. Vázquez, 2012. "Bank Funding Structures and Risk: Evidence From the Global Financial Crisis," IMF Working Papers 12/29, International Monetary Fund.
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