APRA can already bail-in senior bond holders (and what the new TLAC rules mean)

Christopher Joye

Coolabah Capital

In The AFR I unravel the Financial Stability Board's complex final "total loss absorbing capacity" (TLAC) rules (released on Monday evening to mitigate the problem of "too-big-to-fail" banks). One of the most interesting and little-understood insights to come out of this exercise is the recognition that ARPA already has the capacity to bail-in senior ranking bonds in a crisis, which it formally acknowledged in its response to the Financial System Inquiry: “APRA does have compulsory transfer of business powers, which...could be used to achieve a similar economic effect to a bail-in. Subject to certain triggers and safeguards, this power could be used to transfer a failing ADI’s assets to another entity, leaving behind capital instruments and certain unsecured liabilities to absorb losses,” APRA wrote. Deloitte's regulatory guru Kevin Nixon agrees, commenting, "APRA has far-reaching powers under the Banking Act in respect of winding up a failed institution, giving it powers to do anything it deems appropriate, which means we have de-facto bail-in powers already". Read what TLAC means for the major banks for free via Twitter here (VIEW LINK)


Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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