TLAC: Systemic risk issues and the impact on strategies of cross-border banks

Bernhard  Speyer

Published : 2023-11-21

Vol. 60 No. 3 (2015)

TLAC: Systemic risk issues and the impact on strategies of cross-border banks

Bernhard Speyer

Abstract

The FSB’s proposal on Total Loss Absorbing Capacity (TLAC) constitutes the last major building block of the post-crisis regulatory reform agenda for global financial markets. The proposal aims at creating the preconditions for an orderly liquidation of complex banking institutions that would ensure the continuation of critical financial services without the need to use taxpayers’ money in the
resolution. The FSB’s proposals are fundamentally conducive to achieving these aims. However, the TLAC proposal will have considerable side-effects on the organisational structure and competitiveness of cross-border banking groups; specifically, it is likely to disadvantage banking groups with material foreign subsidiaries. Moreover, while the TLAC proposal provides a comprehensive
framework concerning capital requirements for too-big-to-fail institutions, the treatment of other aspects which influence systemic stability, e.g. liquidity and rollover risk, are underdeveloped.

Keywords:

TLAC, systemic risk, cross-border groups, G-SIBs, banking structure

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Speyer, B. . (2023). TLAC: Systemic risk issues and the impact on strategies of cross-border banks. Safe Bank, 60(3), 23–36. Retrieved from https://ojs.bfg.pl/index.php/bb/article/view/330

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