Fed’s final TLAC rules cut off bank bailouts

Author: | Published: 26 Jan 2017

The Federal Reserve’s final bank capital rules have been hailed as the end of too big to fail

The Federal Reserve Board's final rules regarding total loss absorbing capacity (TLAC) requirements for global systemically important banks (G-Sibs) in the US will require levels of capital and other loss-absorbing capacity that should put the final nail in the coffin of too big to fail. [See 'Rewriting history - A retrospective analysis of now-defunct Continental's fate under the current financial regulatory regime shows that the US commercial lender would likely not have needed a federal bailout' in IFLR's December/January 2017 issue]. Originally designed simply to absorb losses, the advent of risk-based capital also used capital requirements to shape a bank's balance sheet. With the Federal Reserve's final TLAC rules, capital and related loss-absorbing instruments not only absorb losses and shape the balance sheet of the existing bank holding company, they also...



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