Analysis Of The Impact Of Total Loss Absorption Capacity Supervision On China's Banking Industry

In November 2015,the FSB introduced the Total Loss Absorptive Capability(TLAC)capital regulatory requirements for global system-importance banks to reduce the risk level of G-SIBs and to solve "big but not down" issues.China's four major state-owned commercial banks are on the list of regulatory objectives,so this article will analyses the impact of TLAC Requirement on the major four banks.In the short term,TLAC capital requirements will make the four banks have to face huge amount of capital gap,and the capital structure changes which raising the bank's weighted average capital costs,which will lead to a negative impact on the bank's profitability.And the four banks will have a competitive disadvantage in the international development process because of the influence of TLAC requirement.However,in the long run,TLAC capital regulatory requirements can promote the transformation of China's four major banks toward light deposits,light interest income structure,and improve the ability to managing liabilities and multi-channel financing.In addition,this paper attempts to analyze the necessity and feasibility of extending TLAC capital regulatory requirements to more China's banks.Parts of China's national joint-stock commercial banks is expected to grow into the domestic systematic-importance banks,in term of gradually increasing asset size,deposit and loan market shares.This paper argues that there is a need to extend the scope of TLAC regulation.Moreover,the theoretical value of the capital adequacy ratio that can fully offset the loss based on the NPL data reveals that there is also a potential necessity to increase capital adequacy requirements.However,FSB's TLAC capital requirements are too hard for the existing capital level of our bank,and the capital gap is so large that it can take regulation institution to appropriately reduce TLAC capital requirements for national commercial banks in China except for the major four banks.Finally,this paper provides some suggestion of different countermeasures and policy idea for commercial banks and supervisors,respectively.