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The European Banking Federation (EBF) appreciates that the calibration of the standard is at the lower end of the spectrum as originally proposed by Financial Stability Board (FSB) members and allows for a phasing in by 2022. Given the cumulative effects of various capital buffers, the EBF urges policy makers to carefully gauge the implementation of the standard to ensure that it is indeed calibrated at the right level, balancing financial stability with economic growth.
It should be ensured that application of the Total Loss Absorbing Capacity (TLAC) for Globally Systemic Important Banks (GSIBs) requirement is correctly articulated so that it is consistent with the Minimum Requirement for Own Funds and Eligible Liabilities (MREL) introduced by the Banking Recovery and Resolution Directive (BRRD) which is applied to all banks in Europe.
“TLAC is a logical development in capital adequacy, but it will need to fit with European bank resolution measures. We need regional calibration,” said Wim Mijs, Chief Executive of the EBF.“ If not done sensibly, the cumulative force of all these new proposals can seriously constrain EU bank lending and can harm Europe’s global competitiveness. By the way, TLAC addresses the very same issues that are being dealt with in the EU Bank Structural Reform proposal. It effectively makes the EU BSR proposal obsolete.”
The final FSB TLAC term sheet is to be confirmed by the G20 Meeting in Antalya, Turkey on 15-16 November. The EBF is keen to discuss its application in the EU in a way to preserve the universal banking model to support jobs, markets and economic growth in Europe.