 Commercial bank NSFR adjustment and risk: Evidence from ChinaMinghui Li, Kaiyue Li, Yeni Huang and Zhongyu Cao Research in International Business and Finance, 2025, vol. 73, issue PA Abstract: The net stable funding ratio (NSFR) is a critical monitoring indicator of bank liquidity risk introduced under the Basel III accord in 2009. This study used the partial adjustment model to analyze the NSFR adjustment behavior of Chinese commercial banks, leading to the following four findings. First, banks have been undertaking active liquidity adjustment while exceeding global and Chinese minimum standards. Second, the NSFR’s target level and adjustment speed are significantly higher than those of foreign banks. Third, the target NSFR gap is essential to the NSFR’s positive adjustment. Fourth, a higher target level and steady adjustment speed help reduce loss from systemic risk. This paper suggests establishing three liquidity risk firewalls, providing an essential reference for understanding NSFR adjustment in Chinese commercial banks. The study also provides practical significance for policy-level assessments regarding the impact of implementing NSFR supervision and establishing liquidity risk firewalls. Keywords: Net stable funding ratio; Partial adjustment model; Firewall of risk prevention (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:73:y:2025:i:pa:s0275531924003520 DOI: 10.1016/j.ribaf.2024.102559 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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