27 April 2018

On 9 April 2018, the Monetary Authority of Singapore (“MAS”) issued a consultation paper on “Proposed Regulatory Capital Treatment of Banks’ Holdings of Total Loss-Absorbing Capacity (TLAC) Liabilities under MAS Notice 637”, seeking comments on proposed amendments to MAS Notice 637 on “Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore” (“Notice”).

This consultation follows from the publication by the Basel Committee on Banking Supervision (“BCBS”) of “TLAC holdings - Amendments to the Basel III standard on the definition of capital” which sets out the regulatory capital treatment of banks’ investments in total loss-absorbing capacity (“TLAC”) and pari passu instruments. The proposed amendments to the Notice seek to implement the relevant requirements under the final standard issued by the BCBS, which are aimed at limiting the contagion within the financial system if a global systemically important bank were to enter resolution. The proposed amendments are intended to take effect from 1 January 2019.

In particular, MAS seeks comments on its proposal to introduce an additional 5% threshold for non-regulatory capital TLAC holdings in accordance with the Basel standard on TLAC holdings. It is also proposed that the additional 5% threshold may be used only for non-regulatory capital TLAC holdings that meet the following conditions:

  • the holding is in the bank’s trading book; and 
  • the holding is sold within 30 business days of the date of its acquisition.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg:

 

Download PDF