TLAC holdings standard

This version

BCBS  | 
12 October 2016
Status:  Consolidated


This standard has been integrated into the consolidated Basel Framework.

This document is the final standard on the regulatory capital treatment of banks' investments in instruments that comprise total loss-absorbing capacity (TLAC) for global systemically important banks (G-SIBs).

The standard aims to reduce the risk of contagion within the financial system should a G-SIB enter resolution.  It applies to both G-SIBs and non-G-SIBs.  The main elements of the prudential treatment are as follows:

  • Tier 2 deduction: banks must deduct holdings of TLAC instruments that are not already included in regulatory capital from their own Tier 2 capital.

  • Threshold below which no deduction is required: the deduction is subject to the thresholds that apply to existing holdings of regulatory capital and an additional 5% threshold for non-regulatory-capital TLAC holdings only.

  • Instruments ranking pari passu with subordinated forms of TLAC must also be deducted.

The standard also reflects changes to Basel III to specify how G-SIBs must take account of the TLAC requirement when calculating their regulatory capital buffers.

The standard will take effect at the same time as the minimum TLAC requirements for each G-SIB. These requirements are set out in the Financial Stability Board's TLAC standard for G-SIBs. They take effect on 1 January 2019 for most G-SIBs, but later for those whose headquarters are in emerging market economies.