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: 鈥淭he conformance period will be accelerated if, in the next five years, corporate debt market in these economies reaches 55 percent of the emerging market鈥檚 economy鈥檚 GDP.鈥�
Mark Carney, chair of the FSB, said 鈥淭he 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.鈥�
鈥淭his new standard, which will be implemented in all FSB jurisdictions, is an essential element for ending too-big-to-fail for banks.鈥�
鈥淭he economic impact assessments conducted as part of the detailed policy work shows that the economic benefits of the final standard far outweigh the costs.鈥�
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: 鈥淭he conformance period will be accelerated if, in the next five years, corporate debt market in these economies reaches 55 percent of the emerging market鈥檚 economy鈥檚 GDP.鈥�
Mark Carney, chair of the FSB, said 鈥淭he 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.鈥�
鈥淭his new standard, which will be implemented in all FSB jurisdictions, is an essential element for ending too-big-to-fail for banks.鈥�
鈥淭he economic impact assessments conducted as part of the detailed policy work shows that the economic benefits of the final standard far outweigh the costs.鈥�
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