Asia’s TLAC questions revealed

Author: Ashley Lee | Published: 19 Nov 2014

The Financial Stability Board’s (FSB) consultation paper on banks’ total loss-absorbing capacity (TLAC) was in line with expectations. But more clarity is needed on both the FSB’s proposal and domestic bank resolution regimes across the region.

The TLAC is meant to provide additional capital to a failing bank by absorbing losses through write-downs, forgiveness or conversion into common equity. It will apply to banks designated as global systemically important banks (G-Sibs) by the FSB.

Concerns remain on how the TLAC will be implemented in Asia, where an emerging markets carve-out has raised questions and where major centres have not yet implemented resolution regimes.

"We’re supportive of this concept," said Mark Austen, chief executive officer of the Asia Securities Industry and Financial Markets Association (Asifma). "Our concerns are more around some of the technical issues that need to be discussed more and looked into in greater detail."