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
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