FSB issue final TLAC standard
09 November 2015 Basel
Image: Shutterstock
The final total loss-absorbing capacity (TLAC) standard for globally systemically important banks (G-SIBs) has been published by the Financial Stability Board (FSB).
G-SIBs must meet a minimum TLAC requirement of at least 16 percent of risk-weighted assets (RWA), from 1 January 2019.
This will increase to 18 percent on 1 January 2022.
Minimum TLAC must also be at least 6 percent of the Basel III leverage ratio exposure (LRE) from 1 January 2019 and at least 6.75 percent as from 1 January 2022.
G-SIBs headquartered in emerging market should meet the 16 percent RWA and 6 percent LRE TLAC requirement on 1 January 2025.
The 18 percent RWA and 6.75 percent LRE TLAC requirement must also be met by 1 January 2028.
G-SIBs will be required to meet the TLAC requirement alongside the minimum regulatory requirements set out in the Basel III framework.
The FSB clarified that: “The conformance period will be accelerated if, in the next five years, corporate debt market in these economies reaches 55 percent of the emerging market’s economy’s GDP.”
Mark Carney, chair of the FSB, said “The FSB has agreed a robust global standard so that G-SIBs can fail without placing the rest of the financial system or public funds at risk of loss.”
“This new standard, which will be implemented in all FSB jurisdictions, is an essential element for ending too-big-to-fail for banks.”
“The economic impact assessments conducted as part of the detailed policy work shows that the economic benefits of the final standard far outweigh the costs.”
G-SIBs must meet a minimum TLAC requirement of at least 16 percent of risk-weighted assets (RWA), from 1 January 2019.
This will increase to 18 percent on 1 January 2022.
Minimum TLAC must also be at least 6 percent of the Basel III leverage ratio exposure (LRE) from 1 January 2019 and at least 6.75 percent as from 1 January 2022.
G-SIBs headquartered in emerging market should meet the 16 percent RWA and 6 percent LRE TLAC requirement on 1 January 2025.
The 18 percent RWA and 6.75 percent LRE TLAC requirement must also be met by 1 January 2028.
G-SIBs will be required to meet the TLAC requirement alongside the minimum regulatory requirements set out in the Basel III framework.
The FSB clarified that: “The conformance period will be accelerated if, in the next five years, corporate debt market in these economies reaches 55 percent of the emerging market’s economy’s GDP.”
Mark Carney, chair of the FSB, said “The FSB has agreed a robust global standard so that G-SIBs can fail without placing the rest of the financial system or public funds at risk of loss.”
“This new standard, which will be implemented in all FSB jurisdictions, is an essential element for ending too-big-to-fail for banks.”
“The economic impact assessments conducted as part of the detailed policy work shows that the economic benefits of the final standard far outweigh the costs.”
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