Guiding Principles on the Internal Total Loss-absorbing Capacity of G-SIBs (‘Internal TLAC’)

A key objective of the FSB’s Total Loss-Absorbing Capacity (TLAC) standard is to provide home and host authorities with confidence that global systemically important banks (G-SIBs) can be resolved in an orderly manner and thereby to minimise incentives to ring-fence assets domestically. A resolution entity should generally act as a source of loss-absorbing and recapitalisation capacity for its material subsidiaries or sub-groups, where those subsidiaries are not themselves resolution entities. To this end, internal TLAC mechanisms should be put in place to down-stream resources to material subsidiaries or sub-groups. This consultative document proposes a set of high-level guiding principles to assist home and host authorities in the implementation of internal TLAC mechanisms consistent with the TLAC standard. The guiding principles cover:

• Identification and composition of material sub-groups subject to an internal TLAC requirements;
• The size and composition of the internal TLAC requirement;
• Design of the trigger mechanism for internal TLAC; and
• Cooperation and coordination between home and host authorities in triggering internal TLAC

Home and host authorities within Crisis Management Groups (CMGs) are expected to take these guiding principles into account as they identify material sub-groups and formulate requirements for internal TLAC mechanisms for their G-SIBs. Public comments are welcome by 10 February 2017 and should be sent to [email protected].