On October 12, 2016, the Basel Committee published the final Standard for Total Loss Absorbing Capacity holdings. The Financial Stability Board published the TLAC requirements for global systemically important banks in November 2015, which set a minimum requirement for TLAC for G-SIBs, including a Term Sheet implementing the requirements. The Term Sheet states that G-SIBs must deduct, from their own TLAC or regulatory capital, exposures to TLAC instruments and liabilities issued by other G-SIBs and calls on the Basel Committee to further specify these requirements. The Basel Committee consulted in November 2015 on the proposed treatment of TLAC holdings in G-SIBs.
The TLAC holdings standard will require banks to deduct holdings of TLAC instruments that are not already included in regulatory capital from their own Tier 2 capital, subject to the thresholds that apply to existing holdings of regulatory capital and an additional 5 per cent threshold for non-regulatory-capital TLAC holdings only. In addition, instruments that are ranked at the same level as subordinated forms of TLAC must also be deducted.
The TLAC holdings standard will apply to G-SIBs and non-G-SIBs from January 1, 2019 for investments in most G-SIBs which is the same time that the TLAC requirements apply. The TLAC holdings standard will apply later for G-SIBs headquartered in emerging market economies.
The final Standard is available at: http://www.bis.org/bcbs/publ/d387.pdf.
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