A revised version of the NSFR has recently been released by the Basel Committee.12 It complements the LCR by looking beyond a 30-day period to achieve a stable funding profile for firms more generally. In this regard, it is important to recall that the deterioration of funding markets began well before the financial crisis reached its acute stages.
In the summer of 2007, responding to signs of trouble in the subprime mortgage markets, creditors reduced the maturities of funding they were willing to provide to financial intermediaries that had been creating and holding securities backed by subprime – and eventually other – mortgages.13 This process left those intermediaries in increasingly fragile funding positions, and by the time Lehman Brothers collapsed in September 2008, the system was primed for a devastating run.