FSB's 'loss absorbing' rule could swamp debt market

Brussels

BANKS from Tokyo to London say the Financial Stability Board's plan for tackling too-big-to-fail banks may drown the corporate bond market in new paper and drive up funding costs for all companies.

With about US$4 trillion of instruments in the market that will fall under the FSB's proposal on total loss absorbing capacity, or TLAC, the regulator needs to widen the range of securities that comply with the rule, according to industry groups including the Institute of International Finance and the Global Financial Markets Association.