The Basel Committee on Banking Supervision (BCBS) has published a consultative document which sets out its proposed deduction treatment for banks’ investments in Total Loss-Absorbing Capacity (TLAC), and its proposals on the extent to which instruments ranking pari passu with TLAC should be subject to the same deduction treatment.

In particular the BCBS proposes that internationally active banks (both global systemically important banks and non-global systemically important banks) be required to deduct their net TLAC holdings that do not otherwise qualify as Basel III capital from their own Tier 2 capital (i.e. in a manner consistent with the Basel III treatment of banks’ investments in the Tier 2 capital of other banks). The consultative document also sets out the BCBS’ planned approach for defining what constitutes a TLAC holding by an investing bank, and therefore the types of holdings that will be subject to the Tier 2 deduction approach.

The deadline for comments on the consultative document is 12 February 2016.

View TLAC Holdings – consultative document, 9 November 2015