Prudential supervision requires banks to manage their liquidity profiles alongside their capital reserves. Basel III manages short-term liquidity through the Liquidity Coverage Ratio (LCR) and long-term structural liquidity through the Net Stable Funding Ratio (NSFR).

The NSFR requires banks to maintain a stable funding profile in relation to the composition of their assets over a one-year horizon, preventing dangerous maturity mismatches:

NSFR = Available Stable Funding / Required Stable Funding

The ratio must remain equal to or greater than 100%. This mandate forces banks to fund long-term, illiquid assets (like residential mortgages) with reliable, long-term capital sources (such as regulatory capital and stable customer deposits), rather than relying on volatile, short-term wholesale money markets.