Financial Services Associations Comment on Total Loss-Absorbency Requirement for G-SIBs

SIFMA, the Clearing House, the American Bankers Association, the Financial Services Roundtable and the Financial Services Forum (the "Associations") submitted comments to the Board of Governors of the Federal Reserve System in response to a proposal to impose total loss-absorbing capacity ("TLAC"), long-term debt and related "clean holding company" requirements on global systemically important banking groups ("G-SIBs").

The Associations recommended that, among other things, the Federal Reserve modify the proposed TLAC rule in order to implement the following changes:

• Eliminate the requirement to hold a specific portion of loss-absorbing capacity as debt. The Associations stated that banks should have the option to meet TLAC requirements when debt or equity is due.

• Calibrate and reduce the required amounts of TLAC. Absent reduction, the Associations asserted: "these excessive requirements will increase the cost of borrowing by U.S. G-SIBS, which in turn may increase the cost of credit to the market and run a risk of reducing the amount of credit available to the economy."

• Either eliminate the TLAC Supplementary Leverage Ratio ("SLR") or limit it to operation as a backstop.

• Revisit the standard for loss-absorbing long-term debt securities that qualify as Eligible Debt Securities ("EDSs").

• Eliminate restrictions on any capital structure liabilities under the Clean Holding Company Framework.

• Provide grandfathering from the various restrictions and requirements in the proposed rule, especially if modifications to EDSs or the clean holding company framework are not made.

• Refrain from imposing any domestic internal TLAC for the domestic subsidiaries of U.S. G-SIBs.