PBOC Deputy Governor Calls for China’s Global Systemically Important Banks to Improve TLAC Management

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People’s Bank of China (PBOC) deputy governor Xuan Changneng (宣昌能) has called for greater efforts to improve the total loss-absorbing capacity (TLAC) by China’s global systemically important banks (G-SIBs).

Speaking at the 2022 Financial Street Forum (2022金融街论坛年会) on 21 November, Xuan outlined recommendations across four areas for helping China’s G-SIBs satisfy TLAC requirements, including:

  1. Implementation of improved TLAC internal management mechanisms by China’s G-SIBs, and the formulation of medium and long-term plans for TLAC to reach targets, to ensure that TLAC regulatory requirements are satisfied in both 2025 and 2028.
  2. Driving the use of TLAC instruments for external supplementation. Organising and planning the issuance of capital instruments and TLAC non-capital bonds.
  3. Driving the issuance of TLAC instruments and expanding the market acceptance capacity. Continuing to expand the market acceptance capacity for TLAC non-capital bonds, Improving the issuance environment, and expanding the investor scope. Encouraging China’s G-SIBs to issue TLAC non-capital bonds in offshore markets.
  4. Improving the systemic framework and shoring up legal foundations. On the foundations of existing measures, further researching TLAC information disclosures and internal TLAC rules, to continually improve China’s TLAC regulatory system and raise the domestic and external disposal capacity of China’s G-SIBs.

Xuan mooted consideration of amendments to China’s Commercial Bank Law and other related laws, in order to further refine and clarify the order of claims in the case of bank insolvency. He highlighted the importance of such amendments for clarifying the order of repayments for TLAC non-capital debt instruments, in order to better protect the lawful rights and interests of creditors during the disposal process.