FSB reveals 18% TLAC requirement

Author: Ben Bschor | Published: 9 Nov 2015

Most global significant banks (G-SIBs) will have to meet a total loss absorbency capital (TLAC) requirement of 18% of the resolution group’s risk-weighted assets (RWAs) as from January 1 2022.

Phase-in begins on January 1 2019, as of which a 16% minimum will apply, the Financial Stability Board (FSB) announced just days ahead of the G20 meeting, which is expected to formally agree the standard.

In addition, TLAC must be at least 6.75% of the Basel III leverage ratio denominator once fully phased in from 2022. This requirement launches at 6% from 2019.

The new term sheet includes a clearer timetable for TLAC requirements for banks from emerging markets. Still, banks from those regions will have significantly more time to comply.

Emerging markets G-SIBs will have to meet TLAC equalling 16% RWAs and 6% of the leverage ratio denominator as of 2025...