The Financial Stability Board (FSB) has published a consultative document entitled Adequacy of loss-absorbing capacity of global systemically important banks in resolution.
The proposals in the consultative document have been developed by the FSB, in consultation with the Basel Committee on Banking Supervision, to enhance the loss-absorbing capacity of global systemically-important banks (G-SIBs) in resolution. The proposals consist of a:
- set of principles that elaborate on the premise set out in the September 2013 report on Progress and Next Steps Towards “Ending Too Big To Fail” that there must be sufficient loss absorbing and recapitalisation capacity available in resolution to implement an orderly resolution that minimises impact on financial stability, ensures the continuity of critical functions, and avoids exposing taxpayers to loss; and
- term sheet that is a proposal for implementing these principles in the form of an internationally agreed standard on the adequacy of total loss-absorbing capacity (TLAC) for G-SIBs.
The proposals respond to the call by G20 Leaders at the 2013 St Petersburg summit to develop proposals by end-2014. Once finalised they will form a new minimum standard for TLAC.
The deadline for comments on the consultative document is 2 February 2015.
In early 2015, the FSB will undertake comprehensive impact assessment studies to inform the calibration of the Pillar 1 element of the TLAC requirement for all G-SIBs. The TLAC proposals will be finalised by the time of the next G20 Leaders’ summit in 2015 taking into account the results of the consultation and the impact assessments.