Financial Stability Board spells out too-big-to-fail rules
Global systemically important banks will be required to meet a minimum total loss-absorbing capacity requirement of at least 16 per cent of risk-weighted assets under new resolution rules spelled out by the Financial Stability Board in a statement issued overnight.The new standard, which is to take effect from January 2019, will sit alongside Basel III minimum capital requirements.Minimum TLAC will rise to 22 per cent from January 2022. Minimum TLAC must also be at least six per cent of the Basel III leverage ratio denominator from January 2019 and 6.75 per cent from January 2022.The FSB said the TLAC standard had been designed so that failing G-SIBs would have efficient loss-absorbing and recapitalisation capacity available for authorities to implement an orderly resolution.Australia has no G-SIBs but the Financial System Inquiry recommended the implementation of a domestic TLAC framework in line with international practice.Australian Prudential Regulation Authority chairman Wayne Byres said last week that the Government's response to the FSI endorsed APRA to move on this recommendation.Byres said he expected to begin discussions on an Australian framework for loss-absorbing and recapitalisation capacity next year