Fad Diets and NSFR

What is NSFR? Net Stable Funding Ratio is a Basel III Capital Requirement set by the G-20 The Federal Reserve and the FDIC implemented NSFR in US law. NSFR applies to bank holding companies with over $250 billion in assets or over $10 billion in on-balance-sheet foreign exposure. It applies in a modified form for bank holding companies with $50-$250 billion in assets. NSFR reports must be provided quarterly to the public through a website or quarterly financial statements. If reports aren’t provided, institutions can be fined or regulators can insist on capital charge changes. What is 8of9? 8of9 is a next generation RegTech company that translates complex financial regulation into simple solutions. We strive to build a world where regulatory compliance is automated and easy to understand.  Our tools capture, store, and monitor regulatory content so you can focus on doing what you do best. We built our business model with normal humans in mind.

Watching Your NSFR Weight Think of NSFR as another fad diet from the regulators with the same data you are already using for other stress tests. Equity and liabilities multiplied by specific stability factors Available Stable Funding Weight Required Stable Funding Weight 100 100 * Equity and assets multiplied by specific risk and liquidity factors * Note: Institutions subject to the modified ratio must maintain ASF levels above 70%.

NSFR Nutritional Facts NSFR requires you to count your “capital calories” which change depending on the products you trade in. Liability Type ASF Weight Asset Type RSF Weight Capital 100% Cash 0% Long Term Borrowing (12m+) OBS 5% Client Deposits Current Savings Time 90% 95% Securities Level 1 Level 2 50% Other Deposits / Short Term Borrowing 1m – 6m 6m - 12m Loans ...to Banks ...to Other Borrowers 85% Trading / Pension Liabilities Derivatives Bank Deposits Other Assets

How This New Diet May Impact Your Business Capital on Hand                   (Most stable source of funding) Derivatives                           (Requires 100% stable funding) Short-term Loans                 (Requires less stable funding than long term)  Long-term Loans (Requires more stable funding than short term)

How Do You Shape Up Against Others Watching Their Weight? This new diet may seem tough, but not impossible! In fact, according to 2012 IMF data, most of the world is already complying with the NSFR. Source: https://www.imf.org/external/pubs/ft/wp/2014/wp14106.pdf

Why facing NSFR is so challenging There are five major obstacles in implementing NSFR. 1. The underlying data is unreliable or is not in the format required to make a regulatory determination. 2. Regulation overlaps with itself and other regulations and puts pressure on SMEs. 3. The regulations are complex and constantly changing. 4. Internal processes within financial institutions are also constantly changing. 5. Insufficient Governance and Granularity Bad Data! Regulatory Rat Nests! Changing Regulations! Lot of Complexity! No Audit trail! Compliance required by January 1, 2018!

Don’t Worry, You’re Already Collecting The Data You Need! Chances are, your organization is not coordinating, but the underlying data is the same. NSFR DFAST EMIR Requires accounting of derivatives values (MTM or other) Requires accounting of collateral value Requires quarterly accounting of on and off balance sheet items Requires accounting of held securities Requires accounting of customer deposits and loans

How can help you with NSFR. Data Internal to the customer Data External to the customer Data that needs to be Created Regulatory Answer! 8of9 believes that all regulation should be broken down into ones and zeros. All data falls into one of the following categories. 8of9’s real time RegOil™ Engine Other Service Providers 3rd Party Data Cleanse Fully auditable, controlled, accurate, up-to-date answer, transaction by transaction Output of data cleanse prepared in appropriate rules engine formatting Non Regulatory Data (e.g. Pricing Data) Up to date regulatory status and rules 8of9’s Business Logic Engine

Steps To Tracking NSFR Compliance Receive Client Data Examine Data Format & Categories Model Logic Engine Based On Rule Teach Program To Understand The Various Categories In Terms Of The Rule Assign Regulatory Weights To Each Category Program Engine To Add Up Various Categories And Apply Weight Factor Have Program Take The Converted Values And Run Ratio Calculation Report NSFR Level 8of9 will monitor the regulations for changes and keep the model up-to-date! Data points from NSFR are interchangeable with other regulatory requirements. We can test hypothetical situations to see if a change in business will alter compliance status.

We look forward to working with you soon! Help us help you. We look forward to working with you soon! Chief Nerds CEO Mary Kopczynski, J.D./Ph.D. COO Matthew Fand, J.D./M.B.A. Address 8of9 1115 Broadway 11th Floor New York, NY 10010 Phone & Fax Phone: 917-261-3901 Online Email: info@8of9.nyc Website: www.8of9.nyc