Assessing the economic costs and benefits of TLAC implementation

November 2015

At the request of the Financial Stability Board (FSB) a group of experts conducted an assessment of the economic impact of TLAC implementation. The group comprised staff from 12 central banks and regulatory agencies, the International Monetary Fund and the Bank for International Settlements (BIS) and was chaired by Kostas Tsatsaronis (BIS). This report presents the results of the analysis.

The report sets out the findings of this micro- and macroeconomic impact assessment. The microeconomic component assesses the impact of TLAC requirements on individual banks in terms of their cost of funding and required increase in lending margins to recuperate these costs. It also assesses the likely impact on bank risk-taking of a more structured resolution framework funded by TLAC. The macroeconomic component assesses the balance between the macroeconomic costs, stemming from higher credit intermediation costs, and macroeconomic benefits, stemming from more efficient resolution and reduced risk-taking, of TLAC requirements to the economy as a whole.