The NSFR · RiskAtoms Academy

By the end you will be able to

1Assign ASF and RSF factors line by line, by counterparty and residual maturity, with the paragraph for each.
2Apply the 35% risk weight test to mortgages and the treatment of loans with no stated maturity.
3Net derivative assets and liabilities, add the 5% to 20% charge on gross liabilities, and say when assets and liabilities are interdependent.
4Rebuild RiskAtoms Bank's NSFR: 146.7% as booked, 143.1% under Basel rule by rule, and 148.6% under the PRA's rules.

Why it matters

The LCR asks whether a bank survives a month. The NSFR asks whether its business model survives a year: are long, illiquid assets funded by money that stays? RiskAtoms Bank passes either way. But read against NSF30 line by line, £5,576m of its mortgages fail a test Level 3 assumed they passed, and its ratio falls from 146.7% to 143.1%. Read against the PRA's rules it rises to 148.6%. The factors are where the arguments are.

Core explanation

Stable funding, factor by factor

Illustrative dataRiskAtoms Bank plc's liquidity book, under the rules

The same made-up UK bank as Level 3: a £67bn balance sheet at 31 December 2025, in £ millions, with every line's maturity, HQLA level, LCR rate and NSFR factor. Module 3.5 computed an LCR of 157.4% and an NSFR of 146.7% from it, in simplified form; those stay the bank's booked figures. Module 4.5 rebuilds both ratios line by line from the rule text, using Module 4.1's split of the securities lines, and shows where the rules give a different number and why. Where a page adds an assumption of its own, it is labelled illustrative.

This page uses every line of the book with its residual maturity bands, Module 4.1's mortgage loan-to-value split and securities split, the derivatives of Module 3.4 and the hedges of Module 3.6.

L3.5.07: LCR and NSFR in practice built the ratio: available stable funding over required stable funding, at least 100% (NSF20.2). Each balance is split by residual maturity and weighted by a factor for its band.

Available stable funding

Funding	Under 6m	6–12m	1y+ / none	Factors	ASF
Stable retail deposits	22,000	0	0	95% / 95% / 100%	20,900
Less stable retail deposits	10,000	0	0	90% / 90% / 100%	9,000
Retail fixed-term deposits	2,000	1,600	2,400	90% / 90% / 100%	5,640
Operational deposits from companies	5,000	0	0	50% / 50% / 100%	2,500
Other corporate deposits	5,200	300	0	50% / 50% / 100%	2,750
Deposits from banks and other financial institutions	3,000	0	0	0% / 50% / 100%	0
Repo funding secured on gilts	1,500	0	0	0% / 50% / 100%	0
Commercial paper and certificates of deposit	1,800	200	0	0% / 50% / 100%	100
Senior unsecured bonds	500	0	3,500	0% / 50% / 100%	3,500
Covered bonds issued	0	0	2,500	0% / 50% / 100%	2,500
Central bank term funding	0	0	1,000	0% / 50% / 100%	1,000
Subordinated debt	0	0	500	0% / 50% / 100%	500
Shareholders' equity	0	0	4,000	100% / 100% / 100%	4,000
Available stable funding					52,390

Every factor matches NSF30.10–30.14: 100% for capital and funding of a year or more, 95% for stable retail deposits, 90% for less stable, 50% for operational deposits and other company money under a year, 0% for financial institutions under six months. One detail is worth seeing. Capital counts before the application of capital deductions (NSF30.10(1)): the bank's £4,000m of equity counts in full, though its goodwill and software come off CET1 in L4.1.02: Common Equity Tier 1.

Required stable funding

Asset or commitment	Under 6m	6–12m	1y+ / none	Factors	RSF
Cash and central bank reserves NSF30.25	0	0	6,000	0% / 0% / 0%	0.0
UK government bonds NSF30.26	1,000	800	5,200	5% / 5% / 5%	350.0
Covered bonds and AA corporate bonds NSF30.28	200	200	1,600	15% / 15% / 15%	300.0
BBB corporate bonds and listed shares NSF30.29	50	50	900	50% / 50% / 50%	500.0
Reverse repos with banks, secured on gilts NSF30.27	3,000	0	0	10% / 50% / 100%	300.0
Unsecured placements with banks NSF30.28	1,500	0	0	15% / 50% / 100%	225.0
Residential mortgages NSF30.29	900	900	28,200	50% / 50% / 65%	20,980.0
Loans to companies NSF30.29	2,300	1,700	8,000	50% / 50% / 85%	8,800.0
Personal loans and credit cards NSF30.29	450	400	2,650	50% / 50% / 85%	2,677.5
Other assets NSF30.32	0	0	1,000	100% / 100% / 100%	1,000.0
Undrawn committed credit facilities to companies NSF30.34	0	0	8,000	5% / 5% / 5%	400.0
Undrawn liquidity facilities to companies NSF30.34	0	0	500	5% / 5% / 5%	25.0
Undrawn committed facilities to other banks NSF30.34	0	0	300	5% / 5% / 5%	15.0
Undrawn retail limits NSF30.34	0	0	3,000	5% / 5% / 5%	150.0
Required stable funding, as booked					35,722.5

Of the mortgages, £5,000m are pledged for a year or more and take 100% (NSF30.20). The rest of the book follows the factor ladder: reserves 0%, Level 1 5%, Level 2A 15%, Level 2B and most other assets under a year 50%, long loans 65% or 85%, the rest 100%.

Where the rule text gives a different number

Module 3.5 used the standard factors in simplified form. Line by line, three items move. They are not errors in the book; they are places where the text is more specific than a teaching ladder needs to be. The card balances (£1,000m) do not move: NSF30.17 deems loans without a stated final maturity to run over a year, so with a risk weight above 35% (CRE20.68) they keep Level 3's 85% (NSF30.31(2)), not the 100% NSF30.32(3) gives other assets with no stated maturity.

Item	RSF change	Rule
Mortgages with an SA risk weight above 35% (£5,576m, 18.6% of the book)	+862.4	NSF30.30, 30.31, 30.15
Shares in banks and insurers (£120m): not HQLA	+42.0	NSF30.31(3)
Derivative assets net of cash variation margin received	−19.0	NSF30.23–30.24, 30.32(2)
Basel against the book	+885.4

The 35% test. A residential mortgage of a year or more takes 65% only if it “would qualify for a 35% or lower risk weight under CRE20” (NSF30.30), and the standardised weights apply even to a bank on IRB (NSF30.15). Under CRE20 the bank's 80–95% LTV segment weighs 40% to 50%, so it takes 85%. Spread pro rata over the £23,200m of unencumbered mortgages of a year or more illustrative, that is 23,200 × 18.59% × 20% = £862.4m.
Financial shares. Shares in banks and insurers are not HQLA (L4.5.01: The LCR: high-quality liquid assets). As exchange-traded equities that are not HQLA they take 85% (NSF30.31(3)), not Level 2B's 50%.
Derivatives. Level 3 charged all £60m of derivative assets at 100% inside other assets. The rule nets cash variation margin received, where it meets the leverage ratio's conditions for netting (NSF30.24): £19.0m on the Saltney put illustrative, leaving £41.02m.

Derivatives, gross and net

Derivatives enter twice. The NSFR derivative asset, net of NSFR derivative liabilities (which are net of variation margin posted, NSF30.9), takes 100% if positive. And because a bank's derivatives can turn against it, a charge on gross derivative liabilities of 5% to 20%, at national discretion, is added before any margin posted (NSF30.32(5) and its FAQ). The UK and the EU use 5%.

RiskAtoms Bank has no negative netting set today: the Module 3.4 trades other than the put are at market, and Module 3.6's hedges sit in one cleared set worth £241.9m on Module 3.6's curve. Swap by swap, the structural hedge is worth −£49.17m. Were it its own netting set illustrative, it would draw an add-on of £9.83m at 20% or £2.46m at 5%. Small here; for a bank with a large swap book, the choice of rate and of netting sets is worth hundreds of millions.

Interdependent assets and liabilities

Some funding exists only to fund one asset. A supervisor may set both to 0% if they are interdependent: clearly identifiable, the same maturity and principal, the bank acting solely as a pass-through, and different counterparties (NSF30.35), after weighing the incentives it creates (NSF30.36). The NSFR FAQ rules out derivatives. RiskAtoms Bank has no such pairs. Open each case:

The UK view

The PRA's rules, in force since 1 January 2022, differ from Basel on five of the bank's lines, all in the bank's favour. The UK figure below starts from the Basel rule-by-rule RSF:

UK rule (Liquidity (CRR) Part)	RSF change
Level 1 assets other than EHQCB: 0% (Art 428r(1)(a)), not 5%.	−350
Reverse repos with financial customers under 6 months on Level 1 collateral: 0% (Art 428r(1)(g)), not 10%.	−300
Other loans to financial customers under 6 months: 10% (Art 428v), not 15%.	−75
Covered bonds as EHQCB (Level 1): 7% (Art 428t), not 15%.	−96
Mortgages encumbered a year or more in the covered bond cover pool (£3.5bn): 85% (Art 428ag(h)), not 100%.	−525
UK against Basel	−1,346

Booked (Level 3)

146.7%

Basel, rule by rule

143.1%

UK (PRA)

148.6%

Minimum: 100.0%

The formal version

For liabilities and capital $L_k$ with ASF factors $a_k$ , assets $A_m$ and off-balance sheet items $X_n$ with RSF factors $s_m$ and $s_n$ , each split by residual maturity band (NSF20.2, NSF30):

\begin{aligned} \text{NSFR} &= \frac{\text{ASF}}{\text{RSF}} = \frac{\sum_k a_k\,L_k}{\sum_m s_m\,A_m + \sum_n s_n\,X_n + \text{RSF}_{\text{deriv}}} \ \ge\ 100\% \\[4pt] \text{RSF}_{\text{deriv}} &= 100\% \times \max\big(\text{DA} - \text{DL},\ 0\big) + k \times \text{DL}^{\text{gross}} \\ \text{DA} &= \text{derivative assets} - \text{cash VM received}, \qquad \text{DL} = \text{derivative liabilities} - \text{VM posted} \end{aligned}

Each sum runs over every line and band (M-A08: Summation notation): a deposit split 2,000 / 1,600 / 2,400 across the bands is three terms, each with its own factor.
$k$ is 5% to 20% at national discretion; 5% in the UK (Art 428s(2)) and the EU (CRR Art 428s(2)).
Mortgages of a year or more: $s = 65\%$ if the CRE20 risk weight is at most 35%, otherwise $s = 85\%$ ; encumbered a year or more, $s = 100\%$ .

Try it

Start at Level 3's figure. Switch on the mortgage item alone and see most of the gap appear. Add the rest of the Basel items, then the UK ones. Last, split the hedges into separate netting sets and slide the add-on between 5% and 20%.

Try itFrom the booked NSFR to the rule text

Hedging swaps

Add-on on gross derivative liabilities20%

Available stable funding

£52,390.0m

Required stable funding

£35,722.5m

NSFR146.7%

Surplus over 100%£16,668m

Change to RSF from the items0.0

Derivative liability add-on0.00

Illustrative, £ millions. Available stable funding is the same in every view (the UK ASF articles are taken as Basel's). Split into separate netting sets, the structural hedge is a derivative liability of £49.17m: the add-on applies to it gross, before variation margin. Only the add-on is shown; the asset side is left at the carrying value of the capital book. The UK and EU use 5%; Basel lets each country pick 5% to 20%. UK items apply on top of the Basel ones.

Worked example

RiskAtoms Bank's NSFR, rule by rule

£ millions at 31 December 2025. Every input is in the Level 3 book and Module 4.1.

From the book to the UK figure

Step 1 of 6

1
Available stable funding
$\text{ASF} = \underbrace{4{,}500}_{\text{capital}} + \underbrace{35{,}540}_{\text{retail}} + \underbrace{5{,}250}_{\text{companies}} + \underbrace{7{,}100}_{\text{wholesale}} = \text{£}52{,}390\text{m}$

Regulatory lens

The base is NSF20 and NSF30 of the Basel Framework, in force since 15 December 2019, with FAQs published on 30 March 2023 and amended on 5 July 2024. Statements on jurisdictions are as at 3 November 2026 as at 3 Nov 2026.

In the UK

The PRA's NSFR has applied since 1 January 2022, in the Liquidity (CRR) Part of the PRA Rulebook (Part Six, Title IV). The differences on this page: unencumbered Level 1 assets other than covered bonds, and reserves, at 0% (Art 428r); reverse repos with financial customers under six months on reusable Level 1 collateral at 0% and other monies due from them at 10% (Arts 428r(1)(g), 428v); covered bonds as EHQCB at 7%; mortgages in a covered bond cover pool at 85% (Art 428ag(h)); and the 5% charge on the absolute fair value of negative netting sets, gross of collateral (Art 428s(2)).

In the EU

The CRR's NSFR has applied since 28 June 2021 (Part Six, Title IV, as introduced by Regulation (EU) 2019/876), with the same 5% charge on derivative liabilities (Art 428s(2)).

Banks publish their NSFR every half year in template LIQ2 (DIS85), with the latest and previous quarter-ends.

Spark Atoms

Spark AtomThe ratio Northern Rock would have failed

In September 2007 Northern Rock, then the UK's fifth largest mortgage lender with assets of more than £100bn (National Audit Office, March 2009), suffered the first run on the retail deposits of a UK bank since Victorian times. The Treasury Committee called its business model “reckless” and “excessively reliant on wholesale funding” (January 2008). Long mortgages funded by short wholesale money is exactly the mix the NSFR charges for: 65% to 85% required against 0% available.

Spark AtomGoodwill funds nothing, but it is funded

Capital counts in ASF before deductions, while goodwill sits in other assets at 100% RSF (NSF30.32(4) lists items deducted from capital). The NSFR does not care whether an asset counts as capital; it asks only whether something stable pays for it.

Key takeaways

NSFR = Σ a_k L_k / Σ s_m A_m ≥ 100%, each balance split into under 6 months, 6–12 months and a year or more (NSF20.2, NSF30).
Capital counts before deductions; stable retail 95%, less stable 90%, company money and operational deposits 50%, short money from financial institutions 0%.
Mortgages of a year or more take 65% only with a standardised risk weight of 35% or less; otherwise 85%. Encumbered assets of a year or more take 100%.
Derivatives: net assets at 100%, plus 5% to 20% of gross liabilities; the UK and EU use 5%. Interdependent pairs may be set to 0% if the bank is only a pass-through.
RiskAtoms Bank: ASF £52,390m; NSFR 146.7% as booked, 143.1% under Basel rule by rule, 148.6% under the PRA's rules.

Reaction

Check what stuck

Question 1 · objective 2

A bank holds £1bn of unencumbered five-year residential mortgages at 85% loan-to-value, with a standardised risk weight of 40%. What is their required stable funding, in £m?

£m

Question 2 · objective 1

What counts as capital in available stable funding at 100%?

ATotal regulatory capital before capital deductions, excluding Tier 2 with less than a year to runBCET1 after deductions onlyCAccounting equity less goodwillDTier 1 capital after deductions, plus all Tier 2

Question 3 · objective 3

Suppose the bank's structural hedge, worth −49.17 on Module 3.6's curve, sat in its own netting set. What would Basel's 20% add-on on derivative liabilities be, in £m?

£m

Question 4 · objective 3

Which of these can a supervisor treat as interdependent, at 0% ASF and 0% RSF?

AA government lending scheme the bank passes on, loan for loan, with the same maturity and principalBA swap and the loan it hedgesCA deposit from a company and a loan to the same companyDCovered bonds issued and the mortgages in the cover pool

Question 5 · objective 4

RiskAtoms Bank's ASF is £52,390m and its Basel rule-by-rule RSF £36,607.9m. What is its NSFR, in % (one decimal)?

%

Glossary

Available stable funding (ASF): Available stable funding (ASF): capital and liabilities weighted by how likely they are to stay for a year: 100% for capital and funding of a year or more, down to 0% for short-term money from financial institutions (NSF30.10–30.14).
Required stable funding (RSF): Required stable funding (RSF): assets and off-balance sheet items weighted by how much of them would need funding for a year: 0% for reserves, up to 100% for encumbered and illiquid assets (NSF30.25–30.34).
Residual maturity: Residual maturity: time left until the contractual maturity date. The NSFR uses three bands: under six months, six months to a year, a year or more (NSF30.16).
The 35% test: The 35% test: a residential mortgage of a year or more takes 65% RSF only if it would get a risk weight of 35% or less under the standardised approach (NSF30.30). Otherwise it takes 85% (NSF30.31).
NSFR derivative assets: NSFR derivative assets: the positive replacement cost of derivatives, net of cash variation margin received where the netting conditions are met; charged at 100% after netting against NSFR derivative liabilities (NSF30.23–30.24, 30.32).
Derivative liability add-on: Derivative liability add-on: a required stable funding charge of 5% to 20% (national discretion) on gross derivative liabilities, before variation margin posted, for the funding a bank may need if its derivatives move against it (NSF30.32(5)).
Interdependent assets and liabilities: Interdependent assets and liabilities: pairs a supervisor may set to 0% ASF and RSF, where the bank only passes funding through to the asset, with the same maturity and principal and different counterparties (NSF30.35).

Deep Dives & Origins

Deep Dives

L4.2.02: The standardised approach: retail and real estate: the standardised risk weights for residential mortgages that the 35% test uses. Intermediate.
L4.5.04: Monitoring metrics and the ILAAP: the monitoring metrics that sit beside both ratios, and the ILAAP. Intermediate.

Origins

Basel Committee on Banking Supervision, NSF: Net Stable Funding Ratio (NSF10–NSF99), paras 20.2, 30.8–30.36 and FAQs, version effective 15 December 2019, bis.org.
Basel Committee on Banking Supervision, Basel III – The Net Stable Funding Ratio: frequently asked questions, July 2016, FAQ 18 on loans without a stated final maturity (now NSF30.17); Basel III: the net stable funding ratio, October 2014; CRE20, paras 20.68 and 20.82.
Prudential Regulation Authority, PRA Rulebook: Liquidity (CRR) Part, Arts 428r, 428s, 428t, 428v, 428ag and 428ah, versions of 1 January 2022.
Regulation (EU) No 575/2013, Art 428s(2) (consolidated text on gesetze.legal); European Parliament Legislative Observatory, summary of procedure 2025/0077(COD), 31 March 2025 (NSFR applicable since 28 June 2021).
Basel Committee on Banking Supervision, DIS85: Liquidity, template LIQ2 (Swiss SIF copy).
House of Commons Treasury Committee, The run on the Rock, Fifth Report of Session 2007–08, January 2008; National Audit Office, The Nationalisation of Northern Rock, HC 298, March 2009.

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