Brussels, 09/11/2015 (Agence Europe) - On Monday 9 November, the Financial Stability Board (FSB) published the outlines of the total loss-absorbing capacity buffer (TLAC) which the 30 largest international banks of systemic importance, 12 of which are located in the EU, will have to observe from 2019.
The 30 banks will have to hold a security buffer to absorb any losses and this will be equivalent to 16% of the risk-weighted assets from 1 January 2019 and 18% from 2022, according to a press release of the FSB. The leverage ratio (ratio between own funds and loans granted) of these banks must be 6% from the beginning of 2019 and 6.75% by early 2022. Banks established in emerging countries will have extra time: 2025 for the security buffer and 2028 for the leverage ratio.
The leaders of the G20 are called upon to approve the TLAC buffer at their upcoming summit, to be held in Antalya, Turkey, on 15 and 16 November. Once this is done, it will be the responsibility of the jurisdictions of the G20 to enact these provisions in their internal legislations.
In order to comply with these requirements, the banks concerned will have to raise between an additional €457 and €1,100 billion, according to an impact assessment of the Basel Committee on banking regulations, a body of the Bank for International Settlements.
The Commissioner for Financial Services, Jonathan Hill described the presentation of the TLAC as “decisive steps” to tackle the question of '2big2fail' banks, announced Vanessa Mock, European Commission spokesperson. There are “differences” in terms of banking resolution between the FSB approach and that of the European 'BRRD' directive, which harmonises the national banking restructuring and resolution regimes, but “broadly we recommend the agreement announced this morning”, she added.
The European Banking Federation (EBF) welcomes the fact that the calibration of the TLAC standard is at the lower end of the spectrum originally proposed by the FSB. Stressing the cumulative effects of prudential banking rules, it urges the policymakers to ensure that the new standard is calibrated at the right level. “TLAC addresses the very same issues that are being dealt with in the EU Bank Structural Reform proposal. It effectively makes the EU BSR proposal obsolete”, said Wim Mijs, executive director of the EBF, in a press release (see other article). (Original version in French by Mathieu Bion)