The Federal Reserve's January 24, 2017 final rule sets a minimum external total loss-absorbing capacity, or TLAC, for U.S. global systemically important bank holding companies. The amount must meet the greater of two calculations: 18 percent of risk-weighted assets or 7.5 percent of total leverage exposure. Adding the percentages would misstate the rule. [2017-00431][2015-29740]

TLAC is not simply another name for long-term debt. The operative provision counts specified capital and eligible debt components. Additional buffer provisions sit alongside the minimum, with consequences for capital distributions and discretionary bonus payments. A statement that a company meets one headline ratio therefore does not describe every condition governing its payouts. [2017-00431][2015-29740]

The earlier proposal, published November 30, 2015, would have introduced the domestic risk-weighted requirement in stages: 16 percent from January 2019 and 18 percent from January 2022. The final removed the 2022 phase-in. It scheduled general compliance for January 2019, with separate transition treatment for newly covered firms rather than an identical deadline for every possible future entrant. [2017-00431][2015-29740]

Another distinction concerns jurisdiction. Similar requirements cover qualifying U.S. intermediate holding companies of foreign systemic banking groups, but the domestic ratios cannot be assigned indiscriminately to those entities. The final's March 27, 2017 legal effective date also differs from its compliance schedule. Proposal and final establish the design and its revision within one proceeding, not measured evidence of financial stability. [2017-00431][2015-29740]

Source documents

  1. Total Loss-Absorbing Capacity, Long-Term Debt, and Clean Holding Company Requirements for Systemically Important U.S. Bank Holding Companies and Intermediate Holding Companies of Systemically Important Foreign Banking Organizationshttps://www.govinfo.gov/content/pkg/FR-2017-01-24/html/2017-00431.htm
  2. Total Loss-Absorbing Capacity, Long-Term Debt, and Clean Holding Company Requirements for Systemically Important U.S. Bank Holding Companies and Intermediate Holding Companies of Systemically Important Foreign Banking Organizations; Regulatory Capital Deduction for Investments in Certain Unsecured Debt of Systemically Important U.S. Bank Holding Companieshttps://www.govinfo.gov/content/pkg/FR-2015-11-30/html/2015-29740.htm