Module: | MODULE B: RISK MANAGEMENT
Q469: Consider the following statements regarding the Available Stable Funding (ASF) factors assigned to various liabilities under the NSFR framework:
1. Tier 1 and Tier 2 capital instruments are assigned a 100 percent ASF factor, recognizing them as the most stable sources of funding.
2. Stable retail deposits with a residual maturity of less than one year are assigned a 95 percent ASF factor.
3. Wholesale funding provided by non-financial corporates with a residual maturity of less than six months is assigned a 50 percent ASF factor.
Which of the statements given above is/are correct?
2. Stable retail deposits with a residual maturity of less than one year are assigned a 95 percent ASF factor.
3. Wholesale funding provided by non-financial corporates with a residual maturity of less than six months is assigned a 50 percent ASF factor.
Which of the statements given above is/are correct?
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: Tier 1 and Tier 2 capital instruments represent the highest quality of stable funding and are permanently assigned a 100 percent Available Stable Funding (ASF) factor.
Statement 2 is correct: Stable retail deposits with a residual maturity of less than one year are highly unlikely to be withdrawn quickly, hence they receive a high 95 percent ASF factor.
Statement 3 is incorrect: Wholesale funding from non-financial corporates with a residual maturity of less than six months is considered highly volatile and is assigned a 0 percent ASF factor, not 50 percent. (Funding from 6 months to less than 1 year receives the 50 percent factor).
Statement 2 is correct: Stable retail deposits with a residual maturity of less than one year are highly unlikely to be withdrawn quickly, hence they receive a high 95 percent ASF factor.
Statement 3 is incorrect: Wholesale funding from non-financial corporates with a residual maturity of less than six months is considered highly volatile and is assigned a 0 percent ASF factor, not 50 percent. (Funding from 6 months to less than 1 year receives the 50 percent factor).