Explanation

The correct answer is B. Net stable funding ratio (NSFR).

Key Differences:

• Liquidity Coverage Ratio (LCR): A short-term liquidity requirement designed to ensure banks have sufficient high-quality liquid assets to survive a 30-day stress scenario.
• Net Stable Funding Ratio (NSFR): A longer-term structural liquidity requirement that requires banks to maintain a stable funding profile relative to their asset composition and off-balance sheet activities over a one-year horizon.

NSFR Details:

• Time horizon: 1 year
• Purpose: To promote resilience over a longer time horizon by requiring more stable funding sources
• Calculation: Available stable funding (ASF) / Required stable funding (RSF) ≥ 100%
• Basel III requirement: Part of the Basel III liquidity framework alongside LCR

The NSFR specifically addresses the risk that a bank's longer-term assets are funded with short-term liabilities, which could create liquidity problems during stress periods lasting more than 30 days.