TLAC · Banking Resolution

TLAC

Definition

TLAC — total loss-absorbing capacity — is the FSB's minimum standard of capital and bail-inable debt for global systemically important banks, implemented in the EU through the Capital Requirements Regulation.

The global standard

The Financial Stability Board finalised the TLAC term sheet in November 2015 to ensure that any global systemically important bank (G-SIB) can be resolved without public support. The standard requires a minimum stock of instruments legally capable of absorbing losses in resolution, calibrated as a percentage of risk-weighted assets and of the leverage exposure.

EU implementation

The EU wrote TLAC into directly applicable law in the 2019 banking package: Article 92a CRR sets the minimum requirement for institutions identified as G-SIIs — 18% of risk-weighted assets and 6.75% of the leverage exposure since 2022 — and Articles 72a–72l define which liabilities are eligible. Unlike MREL, which is set bank by bank, the TLAC minimum is a uniform Pillar 1 requirement.

Relationship with MREL

For EU G-SIIs the two regimes stack: the resolution authority sets MREL at a level at least equal to the TLAC minimum and may add a bank-specific amount on top. For all other banks, only MREL applies.