What is net stable funding ratio in SAP FS-LRM - Liquidity and Risk Management?

SAP Term: net stable funding ratio

• Component: FS-LRM

• Component Name: Liquidity and Risk Management

• Description: A key figure that represents a bank's re-financing profile. It is the quotient of weighted assets 'required stable funding' and weighted liabilities 'available stable funding' for a one-year period.

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• Key Concepts: 
  The Net Stable Funding Ratio (NSFR) is a liquidity risk management tool used by banks and other financial institutions to ensure that they have enough stable funding sources to cover their long-term liabilities. It is part of the Financial Services Liquidity and Risk Management (FS-LRM) component of SAP. 
  
  How to use it: 
  The NSFR is calculated by dividing the total amount of stable funding sources by the total amount of required stable funding sources. The ratio should be at least 1.0, meaning that the institution has enough stable funding sources to cover its long-term liabilities. If the ratio is below 1.0, then the institution does not have enough stable funding sources and needs to take steps to increase its liquidity. 
  
  Tips & Tricks: 
  When calculating the NSFR, it is important to consider both the short-term and long-term liabilities of the institution. This will ensure that the institution has enough stable funding sources to cover all of its liabilities, both short-term and long-term. 
  
  Related Information: 
  The NSFR is part of a larger set of liquidity risk management tools used by banks and other financial institutions. Other tools include the Liquidity Coverage Ratio (LCR), which measures a bank’s ability to meet its short-term obligations, and the Leverage Ratio (LR), which measures a bank’s ability to absorb losses in case of a financial crisis.