TLAC Holdings

The Basel Committee's TLAC Holdings consultative document sets out its proposed prudential treatment of banks' investments in TLAC. It is applicable to all banks subject to the Basel Committee's standards, including both G-SIBs and non-G-SIBs.

The proposed treatment is for banks to deduct from their regulatory capital their holdings of TLAC instruments, subject to thresholds. It also addresses the treatment of holdings of instruments that rank pari passu to TLAC in the creditor hierarchy. The objective of the proposed treatment is to support the TLAC regime by reducing the risk of contagion if a G-SIB should enter resolution.

The TLAC regime also necessitates changes to Basel III to specify how G-SIBs must take account of the TLAC requirement when calculating their regulatory capital buffers. In particular, any Common Equity Tier 1 that is being used to meet the TLAC requirement cannot be used to meet the regulatory capital buffers. The proposed changes to Basel III to give effect to this requirement are set out in the consultative document.

The Committee welcomes comments on the TLAC holdings consultative document. Comments on the proposals should be uploaded here by Friday 12 February 2016. Alternatively, comments may be sent by post to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments may be published on the website of the Bank for International Settlements unless a respondent requests confidential treatment.