The Financial Stability Board released a draft discussion paper on the proposed revisions to the capital to be held by Globally Significant Banks GSIBs. The FSB proposes that a single specific minimum Pillar 1 TLAC requirement be set within the range of 16–20% of RWAs and at least twice the Basel 3 Tier 1 leverage ratio requirement. The final calibration of the common Pillar 1 Minimum TLAC requirement will take account of the results of this consultation and the Quantitative Impact Study and market survey which will be carried out in early 2015.
This is higher than current levels (by quite some way), and whilst we should stress that no Australian Banks are GSIBs, and that local capital calculations are worked slightly differently from some other countries, we should expect capital buffers to be increased in a trickle down effect, in due course. Individual banks would be impacted differently, but when we overlay recent APRA and RBA comments, our view that capital buffers will be raised eventually seem to be reinforced.
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