Guiding Principles on the Internal Total Loss-Absorbing Capacity of G-SIBs (‘Internal TLAC’)
In November 2015 the FSB released the Total Loss-Absorbing Capacity (TLAC) standard to be applied to global systemically important banks (G-SIBs). The TLAC standard is designed so that if a G-SIB fails it has sufficient loss-absorbing and recapitalisation capacity available to implement an orderly resolution that minimises impacts on financial stability, ensures the continuity of critical functions and avoids exposing public funds to loss.
The TLAC standard defines a minimum requirement for the instruments and liabilities that should be held by G-SIBs and readily available for bail-in within resolution. It also requires a certain amount of those loss-absorbing resources to be committed to subsidiaries or sub-groups that are located in host jurisdictions and deemed material for the resolution of the G-SIB as a whole (‘internal TLAC’). The guiding principles support the implementation of the internal TLAC requirement and provide guidance on the size and composition of the internal TLAC requirement, cooperation and coordination between home and host authorities and the trigger mechanism for internal TLAC.
The guiding principles were issued for public consultation in December 2016 and have been revised in light of the comments received during that consultation.