The world’s biggest banks are meeting the tougher capital requirements set by global banking regulators in the wake of the financial crisis, concludes the Financial Stability Board (FSB) in a new report.
The FSB published a review of the implementation of added capital requirements, known as the total loss-absorbing capacity (TLAC) standard, which applies to global systemically important banks (G-SIBs).
Among other things, it found that the existing G-SIBs meet, or exceed, their TLAC target ratios. It also noted that these banks have issued between US$350 billion and US$400 billion per year over the past three years in order to meet these requirements.
As a result, the FSB concluded that there’s “no need to modify the TLAC standard at this time.”
However, it also said that further efforts are needed to fully implement the standard, and to determine how to distribute TLAC resources within large banking organizations.
“The successful build-up of loss-absorbing capacity has enhanced the resolvability of G-SIBs and strengthened market belief that too-big-to-fail risks have been reduced,” said Mark Branson, chair of the FSB Resolution Steering Group and CEO of the Swiss Financial Market Supervisory Authority (FINMA).
“However, the job is not complete. Important challenges remain, particularly in ensuring that, in a crisis, TLAC will be available in the right amounts at all locations within a group,” he added.