Final TLAC standard passed as doubts linger

Author: Edward Price | Published: 21 Nov 2015

The Group of Twenty (G20) has approved post-crisis bank regulatory standards designed to end too-big-to-fail. Counsel in the US, however, are sceptical of ever severing the link between big banks and government.

The Financial Stability Board (FSB) issued its final standard for Total Loss Absorbing Capacity (TLAC) earlier this month, which the G20 approved at its November meeting. Minimum TLAC requirements will activate in phases. From January 2019, the requirement will be 16% of risk-weighted assets, rising to 18% in January 2022.

The aim of TLAC, which applies to globally important system banks (G-SIBs), is ensuring tax payers won’t have to bail out large banks in future crises, the so-called too-big-to-fail problem. "But too-big-to-fail is not well defined," said Oliver Ireland, partner at Morrison Foerster

Oliver Ireland
Morrison & Foerster
According to Ireland, post-crisis bank regulation has reduced, not abolished, the likelihood of such bail outs. "It will always...