Market participants believe that the Financial Stability
Board’s (FSB’s) proposals for total
loss absorbing capacity (TLAC) are well-intended, but question
whether banks will be able to implement it.
The TLAC would add an extra layer of loss-absorbency
capacity to global systemically important banks (G-Sibs). A
consultation paper is expected to be released at this
G-20 meeting in Brisbane on November 15 and 16.
It is likely to comprise senior unsecured or subordinated
debt. But it will be hugely expensive for G-Sibs.
expected that the minimum TLAC requirement will be
at least twice the Basel III risk-weighted assets
requirement – excluding all buffers.
Tokio Morita, deputy commissioner of the Japan Financial
Services Authority, declined to comment on unpublished
proposals, but explained that the TLAC combines the Basel III
principles with the concept of gone-concern loss absorbing
capacity (GLAC) while speaking at Thomson Reuters’
Pan Asia Regulatory...