Continuing its work to build out the global total loss absorbing capacity (TLAC) regime, the FSB has added to its basic framework a proposed approach to “internal TLAC” – that is, the total loss-absorbing resources GSIBs would have to commit to material subsidiaries so that subsidiary banks and possibly other entities in the parent group housed in a particular country that are not themselves subject to TLAC would not fail even if their parent companies falter.  Building on the prior FSB decision that there should be internal TLAC for material sub-groups that could pose systemic risk, this consultation does not on its own reopen FSB’s prior decision in favor of internal TLAC but instead addresses the operational infrastructure of internal TLAC in areas such as how it is to be allocated between the parent, when it is triggered, and how differences between home and host regulators – critical questions – are to be resolved.

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