‘Total Loss-Absorbing Capacity’ proposal comes to US

Publication November 13, 2015

On Oct. 30, 2015, the Federal Reserve Board issued a proposed rule requiring global systemically important banks (GSIBs) to meet new requirements to maintain a “total lossabsorbing capacity” (TLAC) ratio that can be met by a combination of additional regulatory capital and unsecured long-term debt.

This proposal would apply to both U.S. bank holding companies classified as GSIBs and the U.S. operations of non-U.S. banking organizations classified as GSIBs. It is aimed at strengthening the resiliency of the GSIBs on an ongoing basis while providing for a more orderly resolution if a GSIB should fail. Comments are due on or before Feb. 1, 2016. Compliance is proposed to begin Jan. 1, 2019, and be fully phased-in by Jan. 1, 2022.

The proposed TLAC requirement and additional related proposals are quite complex. This month’s column provides a high-level general summary of the proposal. Non-U.S. banks classified as GSIBs with U.S. operations organized under an intermediate holding company (IHC) will be directly affected by this proposal and they will want to analyze whether the U.S. proposal may conflict with current or pending home country laws and regulations.

Read the full article: Total Loss-Absorbing Capacity Proposal comes to the United States

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