U.S. bank regulators are expected soon to issue a proposed rule to implement the Basel Committee's "net stable funding ratio" standard, or NSFR. The NSFR — a measure of banks' longer-term funding stability — will mark the end of a six-year odyssey of international regulatory reform colloquially referred to as "Basel III." (Work on Basel IV is already well underway.) The proposal will surely include a vast array of details about what the agencies propose, which will receive careful scrutiny. But before wading into these weeds, it may be worth asking a more fundamental question: Six years later, is the net stable funding ratio still necessary?

For those who don't live and breathe regulatory acronyms, the NSFR is a liquidity standard that was intended to ensure that banks have sufficiently stable funding over a one-year time horizon. It began as a relatively simple concept: a bank's available funding sources over a one-year period should be sufficient to cover the liquidity profile of its assets and off-balance-sheet exposures over the same horizon. (In Basel-speak, a bank's "available stable funding" should be equal to or greater than its "required stable funding.")

From the beginning, the NSFR has always been something of a neglected stepchild of the Basel III framework, frequently relegated to the regulatory backburner while the Basel Committee prioritized a host of other post-crisis capital and liquidity standards. And the NSFR had another dubious distinction — its main purpose was to redress adverse consequences expected to arise from another more esteemed part of Basel III, the "liquidity coverage ratio," or LCR. The LCR (quite sensibly) requires banks to have sufficient liquid assets to survive a 30-day liquidity crunch — that is, an inventory of sufficiently liquid assets to fund a 30-day run assuming very little access to credit.

The LCR was a direct response to the instability of short-term funding that markets experienced during the crisis. The worry, though, was that, if left unchecked, the LCR might create a "cliff effect" of funding stability on the 31st day and beyond because banks could structure their liabilities so that they had every chance of surviving 30 days but practically no chance of surviving thereafter. A second worry was that the LCR did not do much to reduce the liquidity risks of so-called "matched books" of repurchase transactions, a form of short-term wholesale funding that has been of concern to regulators. (I'll leave the debate about the merits of that concern for another day.) The NSFR was viewed as a way to address those risks.

But there's good reason to wonder, more than a half-decade later, whether the NSFR's utility hasn't been eclipsed by other events — at least in the U.S. Over that period, U.S. regulators have put in place a wide range of measures aimed at liquidity risk in banking, including the very same risks that are the NSFR's raison d'etre. These measures include not only implementation of a more stringent version of the LCR in the United States, compared with the Basel standard, but also new rules requiring banks to conduct, on at least a monthly basis, at least three forms of liquidity stress tests across overnight, 30-day, 90-day and one-year horizons. For the largest banks, these tests are complemented by the Federal Reserve's own supervisory liquidity stress testing program, the "Comprehensive Liquidity Assessment and Review."

These post-crisis reforms have been accompanied by additional measures that target short-term wholesale funding risks at banks, the most notable of which is the capital surcharge applicable to "global systemically important banks." A key component of the surcharge is a bank's reliance on short-term funding. These aggressive U.S. measures go to the very heart of the cliff effect and matched-book repo concerns that worried the Basel Committee. Taken collectively, they present a compelling case that the steps already taken are sufficient to resolve — and indeed, resolve with substantial redundancy — the very concerns that led to the NSFR.

It may be that the law of inertia applies to regulation: a rule in motion tends to stay in motion. But it is also true that there is no law or treaty — or anything in Dodd-Frank — requiring that Basel Committee standards be adopted in the United States.

Of course, one might argue that liquidity risk is a significant enough disease to be cured multiple times, particularly if there is no cost in doing so. But compliance with the NSFR would, in fact, come with significant costs, constraining credit extension and curtailing the economic growth that lending so crucially supports by restricting the maturity transformation that is core to what banks do. Furthermore, even as the need for the NSFR has been reduced or even eliminated, the Basel Committee has spent the last six years making the NSFR more and more complicated. As is often the case when international standards are negotiated, the simple concept behind the NSFR has been translated over that period into a rule of substantial technical complexity. As currently drafted, it would effectively require a bank to translate its entire balance sheet into a single ratio. The denominator uses a formula with 23 categories of assets and other exposures each assigned one of eight "required stable funding" factors. The numerator is built from 11 categories of funding assigned one of five "available stable funding" factors.

When the U.S. version of the NSFR proposal comes out, it's likely that many of us will quickly focus on the fine print, quibbling over the RSF factor for this or that asset. But we shouldn't miss the opportunity to reflect on whether the concerns that gave rise to the NSFR still remain today.

Jeremy R. Newell is executive managing director, head of regulatory affairs and general counsel of The Clearing House Association.