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Archive » February 2022 » Eurozone G-Sibs’ resilience: Total Loss Absorbing Capacity and Implied Shock Tolerance

Eurozone G-Sibs’ resilience: Total Loss Absorbing Capacity and Implied Shock Tolerance

Franco Tutino, Michele Adamini, Giuseppe Lia
February 2022 - n. 2
Keywords: Risoluzione, bail-in, Tlac, Implied Shock Tolerance
Jel codes: G21, G28, G32

On November 2015, the Financial Stability Board (Fsb) issued the Total Loss Absorbing Capacity (Tlac) standard, which – starting from 2019 – has been applied to the Global Systemically Important Banks (G-Sibs). This paper aims at evaluating the Tlac adequacy of the Eurozone G-Sibs, in both qualitative and quantitative terms, and the relative degree of resilience. To this end, the research introduces a new indicator, i.e. the Implied Shock Tolerance (Ist), used to estimate the maximum level of the shock that could be absorbed by the concerned banks vis-à-vis their available financial resources. The proposed indicator would also have useful applications at operational level in supporting the calibration methodologies of the loss absorbing capacity.

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