On December 16, 2016, the FSB published a consultative paper containing draft Guiding Principles on the internal total loss-absorbing capacity or Internal TLAC of global systemically important banks. The FSB is proposing the Guiding Principles to support the implementation of the TLAC Standard. The TLAC Standard is designed to ensure that failing G-SIBs will have sufficient loss-absorbing and recapitalization capacity available in resolution. The FSB committed to develop implementation guidance on the TLAC Standard, in particular for internal TLAC. Internal TLAC is the loss- absorbing resources that a resolution entity commits to its material subsidiaries. The proposed Guiding Principles cover, among other things: (i) the process for identifying material sub-groups, the composition of sub-groups, the distribution of internal TLAC between the entities within material sub-groups and the treatment of unregulated or non-bank entities; (ii) the role of home and host authorities and the factors to be considered when determining the size of the internal TLAC requirement; (iii) practical considerations relating to the issuance and composition of internal TLAC; (iv) the trigger mechanism for internal TLAC; and (v) cooperation and coordination between home and host authorities in triggering the write-down and/or conversion into equity of internal TLAC. Responses to the consultation are due by February 10, 2017. The FSB intends to review the technical implementation of the TLAC Standard by the end of 2019.
The consultation paper is available at: http://www.fsb.org/wp-content/uploads/Guiding-Principles-on-the-Internal-Total-Loss-absorbing-Capacity-of-G-SIBs.pdf .
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