The Net Stable Funding Ratio (NSFR) is a liquidity standard that requires financial institutions to maintain a stable funding profile in relation to their assets and off-balance-sheet activities over a one-year horizon. This ratio aims to ensure that banks have sufficient funding to support their activities during periods of economic stress, promoting resilience in the financial system. The NSFR complements other regulatory requirements by focusing on the stability of a bank's funding sources, which is crucial for managing liquidity risks effectively.
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