Last week, Karen Petrou expanded her evaluation of TLAC to focus on insurance companies. In its most recent regulatory agenda, the Financial Stability Board confirmed that it plans not only to finalize TLAC for G-SIBs, but also to impose it on global systemically-important insurers (G-SIIs). Karen argues that the fundamentally different funding and asset structure of G-SIIs raises significant obstacles to using TLAC as an effective buffer against taxpayer bail-out.
Karen has previously argued that TLAC for giant banks should not be adopted until the cross-border resolution regime governing them is clear. Indeed, even in individual countries like the U.S., critical details of the single-point-of-entry resolution protocol remain uncertain, making it impossible to evaluate how much TLAC will be necessary at what level of each G-SIB to protect against what type of insolvency risk. For G-SIIs, the resolution framework is even more fragmentary, making TLAC still more speculative – albeit at least as costly.
Federal Financial Analytics has conducted extensive analyses of TLAC from both a policy and institution-impact perspective. If you have any questions, kindly send an e-mail to info@fedfin.com and we will put you in touch with the relevant FedFin staff expert.