Total Loss-Absorbing Capacity (TLAC) in the EU


Adopting Total Loss-Absorbing Capacity (TLAC) in the EU

September 2016


Upcoming legislation from the European Commission

Upcoming legislative proposal: The European Commission has decided to integrate its planned review of the own funds and eligible liabilities (MREL) framework with its upcoming legislative proposal on bank capital (dubbed "CRD5/CRR2") in order to make the substantial changes necessary to adopt Total Loss-Absorbing Capacity (TLAC) requirements in the EU. This would likely also involve some amendments to the BRRD and SRM Regulation. The legislative proposal is expected either in late 2016 or early 2017.

Combining TLAC and MREL: Under this approach, TLAC would be implemented as a Pillar 1 requirement, at least for G-SIBs, while MREL would remain as a Pillar 2 mechanism to set total loss-absorbency or to top-up TLAC (where applicable).

Setting the scope for TLAC: There is an open question around the scope of banks that will far under the TLAC Pillar 1 requirement. At a minimum, it will be applied to G-SIBs. Some consideration is being given to extending it (in full or in part) to D-SIBs or other systemically important banks, but no clear approach has yet emerged.

Adopting TLAC in the EU
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