CANADA: TLAC Disclosure Requirements Update

Wednesday June 6 2018

The Office of the Superintendent of Financial Institutions guideline sets out OSFI’s disclosure requirements on Total Loss Absorbing Capacity (TLAC) for Canadian Domestic Systemically Important Banks (D-SIBs). It incorporates the TLAC disclosure templates published in the Basel Committee on Banking Supervision (BCBS) Pillar 3 Disclosure Requirements – consolidated and enhanced framework standards issued in March 2017(also referred to as Phase II of Pillar 3).

The disclosures outlined in this guideline complement OSFI’s TLAC guideline issued in April 2018. The purpose of the TLAC requirement is to provide a non-viable D-SIB with sufficient loss absorbing capacity to support its recapitalization.

Canadian D-SIBs are expected to have public disclosure practices that are among the best of their international peers. The TLAC disclosure templates in this guideline provide robust and comparable disclosure requirements that promote transparency and market discipline.

The Annex includes the following TLAC disclosure templates:

• KM2 – Key metrics TLAC requirements
• TLAC1 – TLAC composition
• TLAC2 – Material subgroup entity – creditor ranking at legal entity level (G-SIBs only)
• TLAC3 – Resolution entity – creditor ranking at legal entity level

OSFI’s TLAC disclosure requirements apply to D-SIBs. Templates KM2 and TLAC1 should be disclosed:

• on a consolidated basis for D-SIBs that use a Single Point of Entry (SPE) approach or
• by each resolution group for D-SIBs that use a Multiple Point of Entry (MPE) approach.

The consolidated entity includes all subsidiaries except insurance subsidiaries. Templates TLAC2 (if applicable) and TLAC3 should be disclosed on a legal entity basis.

Disclosure of template TLAC2 is only required where a D-SIB is also designated as a G-SIB and has material subsidiaries or groups of subsidiaries subject to internal TLAC requirements in a foreign jurisdiction.

D-SIBs should implement TLAC disclosures commencing with the quarterly reporting period ending January 31, 2019. D-SIBs should provide quarterly disclosures at the same time as the publication of the financial statements.

Disclosures should be easily located by users. D-SIBs may choose where to provide the disclosures in their financial reports (e.g. management discussion and analysis, financial statement notes, supplemental information or standalone Pillar 3 report). To facilitate ease of locating disclosures, D-SIBs should include TLAC in a disclosure reference index to map the templates and accompanying narrative to their location.

D-SIBs should make available on their websites an archive of disclosures for a minimum of 12 months. Where investor information is available for longer periods, the same archive period should also be used for disclosures.

Please click on the above link for more information.