BNM to extend NSFR observation period to 2020

KUALA LUMPUR: Bank Negara Malaysia ( BNM) is extending the observation period for the Net Stable Funding Ratio (NSFR), the liquidity standard for banking institutions in Malaysia, for another year to 2020 from 2019.

Governor Datuk Nor Shamsiah Yunus said this took into account the bank’s intention to conduct further on- site assessments to validate the maturity and robustness of the liquidity and funding practices of banks, and uneven progress in implementation at the global level.

This is the second extension. It was initially targeted for 2018 and then an announcement was made for an extension to 2019 and now, 2020.

“The Bank remains committed to implementing the NSFR requirements as part of overall liquidity standards applicable to licensed banks in Malaysia.

“At present, all banks maintain adequate liquidity buffers against short term liquidity stress, and the vast majority of banks already report NSFR levels above the minimum 100 per cent based on observation data,” she said in her opening remarks at the Bank Negara Malaysia Financial Stability Conference yesterday.

The NSFR is a minimum standard that requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities.

A stable funding profile reduces the likelihood of a banking institution’s liquidity position being severely eroded by disruptions to its regular sources of funding. Under such circumstances, the viability of the banking institution may be put, or perceived to be, at risk. This could subsequently lead to broader systemic stress. — Bernama