The other new standard is the Net Stable Funding Ratio, which will work to reduce banks’ over-reliance on short-term funding for longer-term assets. 5 These rules make it less likely that banks will face a funding shortfall, which could lead to them overly restrict funding to companies and households.
In addition to Basel III, the Financial Stability Board (FSB) has been leading work to ensure that banks have crisis-management frameworks in place should they come under serious stress that threatens their viability. These include recovery frameworks, which would allow banks to shore up capital, restore confidence and get funding liquidity flowing again.