The People's Bank of China (PBC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly published a Notice that sets out requirements for the issuance of "non-capital bonds" to strengthen the total loss-absorbing capacity (TLAC) of the global systemically important banks (G-SIBs).
This Joint Notice uses the term "non-capital bonds with total loss absorbing capacity” to refer to the financial bonds issued by G-SIBs to meet the requirements of total loss-absorbing capacity, with the function of absorbing losses, yet not belonging to the capital of commercial banks. As per the Notice, the issuance of TLAC non-capital bonds by G-SIBs shall be supervised and managed by PBC and CBIRC in accordance with the financial bond issuance management regulations and banking regulatory rules. The total loss-absorbing capacity of non-capital bonds shall contain write-down or share conversion clauses. When a G-SIB enters the "disposal stage" and the Tier 2 capital instruments are all written down or converted into ordinary shares, PBC and CBIRC may require TLAC non-capital bonds to be written down or converted to common stock in whole or in part. The Notice also stipulates that issuers shall disclose the associated information on a quarterly basis and that issuers or investors may engage credit rating agencies to conduct credit ratings on non-capital bonds with TLAC. The Notice also states that the registration, custody, and settlement of non-capital bonds with TLAC shall be handled at a bond registration, custody, and settlement institution recognized by PBC.
Keywords: Asia Pacific, China, Banking, TLAC, G-SIBs, Disclosures, Systemic Risk, Regulatory Capital, Basel, Non-Capital Bonds, CBIRC, PBC
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