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Biggest Banks May Face 25 Percent Loss Buffer

FSB proposes significant loss-absorbing liability buffers; banks may pass on higher funding costs to clients.

By Ben Moshinsky, Jim Brunsden, and Boris Groendahl, Bloomberg | Updated on November 10, 2014

The world’s largest banks will have to build up their loss-absorbing liability buffers to see them through a crisis, as regulators tackle too-big-to-fail lenders six years after the collapse of Lehman Brothers Holdings Inc.

The Financial Stability Board (FSB), led by Bank of England Governor Mark Carney, said today that the biggest banks may be required to have total loss-absorbing capacity equivalent to as much as a quarter of their assets weighted for risk, with national regulators able to impose still tougher standards. The FSB is seeking comment on the rule, known as TLAC, which would apply at the earliest in 2019.

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