On November 9, 2015, the Financial Stability Board (FSB) published a document containing principles on loss absorbing and recapitalisation capacity of global systemically important banks (G-SIBs) and the total loss absorbing capacity (TLAC) term sheet, together with an accompanying press release.

The TLAC standard defines a minimum requirement for the instruments and liabilities that should be readily available for bail-in in the case of a G-SIB subject to a resolution regime. The aim is that failing G-SIBs will have sufficient loss-absorbing and recapitalisation capacity available in resolution for authorities to implement an orderly resolution that minimises impacts on financial stability, maintains the continuity of critical functions and avoids exposing public funds to loss.

From January 1, 2019, G-SIBs will be required to meet a firm specific minimum TLAC requirement at least equal to 16% of the risk-weighted assets (RWAs) of the group companies within the G-SIN subject to resolution, rising to 18% from January 1, 2022. From January 1, 2019, minimum TLAC must also be at least 6% of the Basel III leverage ratio denominator, rising to 6.75% from January 1, 2022.

The FSB has submitted the TLAC principles and term sheet for endorsement by G20 leaders at the Antalya summit on November 15 and 16, 2015. It will undertake a review of the technical implementation of the TLAC standard by the end of 2019.