Assessing the economic costs and benefits of TLAC implementation
In November 2014 the FSB published, in consultation with the Basel Committee on Banking Supervision (BCBS), a consultative document on an international standard for Total Loss-Absorbing Capacity (TLAC) to be applied to global systemically important banks (G-SIBs). To inform the calibration of the minimum TLAC requirement, the FSB conducted a comprehensive impact assessment study during the course of 2015, comprising a Quantitative Impact Study (QIS) conducted by BCBS and micro- and macroeconomic impact analyses of the costs and benefits of TLAC conducted by a group of experts chaired by the Bank for International Settlements (BIS). The FSB also carried out a market survey to gauge the depth of markets for external TLAC-eligible instruments, and a study to evaluate historical losses and recapitalisation needs of large banks to ensure that the calibration of the minimum TLAC requirement is sufficient to achieve the objectives of TLAC.
This report sets out the findings of the micro- and macroeconomic impact assessment conducted by the BIS. The microeconomic component assesses the impact of TLAC requirements on individual G-SIBs’ cost of capital and funding, and the macroeconomic component assesses the balance between the macroeconomic costs and benefits of TLAC requirements to the economy as a whole.