The Net Stable Funding Ratio (NSFR) is the correct answer because it includes regulatory capital in the numerator. The NSFR is defined as:
NSFR=Required Stable Funding (RSF)Available Stable Funding (ASF)
Where Available Stable Funding (ASF) includes:
- Regulatory capital (Tier 1 and Tier 2 capital)
- Stable deposits
- Other stable funding sources
In contrast:
- Return on Equity (ROE) is a profitability ratio, not a Basel liquidity ratio
- Net Interest Income (NII) is an income statement item, not a ratio
- Liquidity Coverage Ratio (LCR) focuses on high-quality liquid assets and does not include regulatory capital in its calculation
The NSFR was introduced under Basel III to ensure banks maintain stable funding profiles over a one-year horizon, and regulatory capital is explicitly included in the ASF component as it represents the most stable form of funding.