The Chinese regulatory authorities published administrative measures on the total loss-absorbing capacity (TLAC) of global systemically important banks (G-SIBs), with these measures coming into effect on December 01, 2021. The concerned authorities are the People’s Bank of China (PBC), the China Banking and Insurance Regulatory Commission (CBIRC), and the Ministry of Finance of China. These measures are applicable to commercial banks that are incorporated in the jurisdiction of the People's Republic of China and designated by the Financial Stability Board (FSB) as G-SIBs. The key provisions of the measures cover external TLAC ratio requirements, composition of external TLAC, external TLAC deductions, supervisory review, information disclosure, and supplementary provisions.
The term TLAC mentioned in the measures refers to the sum of capital and debt instruments of G-SIBs that can absorb losses by being written down or converted into equity in, and immediately following, a resolution. The term “external TLAC” refers to the loss-absorbing capacity that should be held by the resolution entities of G-SIBs while “internal TLAC” refers to the loss-absorbing capacity committed and allocated by the resolution entities of G-SIBs to their material sub-groups. The external TLAC ratios of a G-SIB shall be calculated pursuant to the provisions of the measures. A G-SIB shall simultaneously comply with the external TLAC requirements specified in the measures and other relevant regulatory capital requirements. A G-SIB shall disclose information on external TLAC pursuant to the provisions of the measures. A G-SIB shall disclose relevant information in accordance with the following requirements:
- External TLAC ratios shall be disclosed on a quarterly basis
- Information concerning, but not limited to, the amount, composition, and maturity of external TLAC shall be disclosed on a semi-annual basis
- Other disclosure matters prescribed by PBC and CBIRC shall be disclosed regularly, as required
Banks that have been designated as G-SIBs before January 01, 2022 shall meet the external TLAC requirements within the timeframe as specified in the measures. Banks that are identified as G-SIBs after January 01, 2022 shall meet the requirements of external TLAC within three years from the date of designation. A G-SIB that enters resolution should be allowed up to two years to meet the requirements of external TLAC again, pursuant to the measures following the date on which it exits resolution, provided that it continues to be designated as a G-SIB by FSB.
Related Links (in Chinese)
Effective Date: December 01, 2021
Keywords: Asia Pacific, China, Banking, G-SIBs, TLAC, Disclosures, Resolution Framework, Regulatory Capital, Basel, PBC, CBIRC
Previous ArticleBoE Paper Discusses AI and Software Validation Challenges
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.
The European Banking Authority (EBA) Single Rulebook Question and Answer (Q&A) tool updates for this month include answers to 10 questions.
The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.
The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).
The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.
The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.
The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).
The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.