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)

2 topics

Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 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...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment