Answer: Net stable funding ratio (NSFR)

The **Net Stable Funding Ratio (NSFR)** is the correct answer because it includes regulatory capital in the numerator. The NSFR is defined as: $$\text{NSFR} = \frac{\text{Available Stable Funding (ASF)}}{\text{Required Stable Funding (RSF)}}$$ 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.

Author: LeetQuiz .