Nick Stafford | published on 4th July 2017

NSFR Impact Analysis – Mark Barnard

Implementation of the first tranche of funding ratios (LCR) was relatively painless. This potentially lulls us into a false sense of security when considering the next tranche – NSFR. Whilst LCR changed the funding profile of the industry, NSFR’s movement of the tenor of liquidity generation to greater than 6 or 12 months dependent upon your type of counterpart is a game changer.

The impact of LCR proved to be a fine tuning exercise for liquidity providers and takers alike, however, moving from principally an overnight market to greater than 30 days maturity had a materially softer impact on a trading desks’ “Greeks“ and the operating model than our analysis to comply with NSFR indicates.

Does the industry understand the front to back impact of NSFR? What about the impact to individual trading desk profitability? Do you know where regulatory compliant liquidity resides?
Many firms remain distracted from the impacts of NSFR due to conflicting priorities such as MiFid2, SFTR and MRUD.

TFE has modelled the impact of change across a firm and can use this insight to evaluate if the current target operating model and business strategy will provide for a optimal approach to managing to the demand of NSFR. Using our TFE-Modus methodology we can ensure that you define a target state which caters for and overcomes the impacts described in the below matrix.

We break down Process, Organisation, Control, Geography, Technology & Value into 46 different impact areas and then score them between 1-3 to generate the following diagram.

To request a full copy of the analysis please contact us here.