Prudential Regulation Authority Rulebook

1.

Unless otherwise specified in this Chapter 4 of Title IV (The Net Stable Funding Ratio), institutions shall take into account the residual contractual maturity of their assets and off-balance sheet transactions when determining the required stable funding factors to be applied to their assets and off-balance sheet items under Section 2.

2.

Institutions shall treat assets that have been segregated in accordance with Article 11(3) of Regulation (EU) No 648/2012 in accordance with the underlying exposure of those assets. Institutions shall, however, subject those assets to higher required stable funding factors, based on the term of encumbrance of those assets. For these purposes, segregated assets are encumbered when the institution is not able freely to dispose of or exchange such assets. Institutions shall consider the term of encumbrance to be the same as the term of the liabilities which generated the segregation requirement.

3.

When calculating the residual maturity of an asset, institutions shall take options into account in a prudent manner. Institutions shall assume that the issuer or counterparty will exercise any option to extend the maturity of an asset. For options that are exercisable at the discretion of the institution, the institution shall take into account reputational factors that may limit the institution's ability not to exercise the option, in particular markets' and clients' expectations that the institution should extend the maturity of certain assets at their maturity date.

4.

In order to determine the required stable funding factors to be applied in accordance with Section 2, for amortising loans with a residual contractual maturity of one year or more, any portion that matures in less than six months and any portion that matures between six months and less than one year shall be treated as having a residual maturity of less than six months and between six months and less than one year, respectively.