WASHINGTON International regulators proposed a common template Tuesday for banks to use when disclosing their long-term liquidity compliance plans, which regulators say will help market participants assess and compare banks' plans to one another.
The Basel Committee on Banking Supervision issued a proposed set of standards for banks to use when disclosing their net stable funding ratio compliance plans. The committee will receive public comment on the rule through March 6.
The proposal would require internationally active banks to disclose their available stable funding items such as regulatory capital, retail deposits and wholesale funding and mandated stable funding, such as high-quality liquid assets, deposits held elsewhere, performing loans and securities. Those items are weighted and used to calculate the net stable funding ratio.
The proposal stipulates that banks must publish the net stable funding ratio disclosure template quarterly or semi-annually, depending on the rules of their home jurisdiction, and must include up-to-date information and explanations of any substantial changes from quarter to quarter.
"It is important that banks adopt a common public disclosure framework to help market participants consistently assess banks' funding risk," the report said. "To promote the consistency and usability of disclosures related to the NSFR, the Committee has agreed that internationally active banks across Basel Committee member jurisdictions will be required to publish their NSFRs according to a common template."
The committee issued its net stable funding ratio rule last month, which requires banks to hold enough "stable liquidity" to maintain their portfolios for one year. That calculation relies on weighting the bank's various income streams based on their inherent risk with its risk-weighted liabilities. The rule is meant to ensure that a bank under stress will have enough liquidity on hand to endure a disruption to the bank's normal funding streams.
The Basel Committee issued a similar common disclosure template for its Liquidity Coverage Ratio rule in January. That rule governs the amount of short-term liquidity a bank must hold to avert a shortfall during times of stress. The Federal Reserve Board in September completed its work on a more stringent LCR, and is expected to issue its own, more stringent version of the NSFR sometime early next year.