SAFE policy letter
https://safe-frankfurt.de/policy-center/policy-publications.html
Refine
Year of publication
Document Type
- Working Paper (64)
Language
- English (64) (remove)
Has Fulltext
- yes (64)
Is part of the Bibliography
- no (64)
Keywords
- financial stability (7)
- coronavirus (4)
- regulation (4)
- systemic risk (3)
- Banking Union (2)
- ECB (2)
- Greece (2)
- Monetary Policy (2)
- Monetary Union (2)
- Solvency II (2)
Institute
35
A recent proposal by the Financial Stability Board (FSB) suggests a new risk capital buffer for globally operating systemically important financial institutions. The suggested metric, “Total Loss Absorbing Capacity“ (TLAC), is composed of Tier-1 capital and loss absorbing debt. In a crisis situation, “bail-in-able” debt is to be written down or converted into equity. Jan Krahnen argues that the credibility of bail-in, in the case of systemically important financial institutions, hinges crucially on the design of TLAC and the requirements that will be placed on loss absorbing “bail-in-able” debt.The fear of direct systemic consequences through bail-in could be overcome, if a holding ban were placed on the “bail-in-bonds” of financial institutions. The holding ban would stipulate that these bonds cannot be held by other institutions within the banking sector.