The Clearing House (TCH), SIFMA, FSR, and the IIB (Associations) commented on the Basel Committee’s November 2015 consultation addressing the treatment under the Basel III capital framework of internationally active banks’ holdings of TLAC instruments of G-SIBs. Specifically, the Associations argue that the Basel Committee’s proposal should: (i) include an exemption for market-making activities; (ii) the cross-holdings deduction should conform to the symmetric “like-for-like” principle of the Basel III capital framework’s corresponding deduction approach; (iii) eliminate the proposal’s inclusion within deductible debt of instruments that rank pari passu with TLAC debt but themselves are not eligible for inclusion in TLAC debt; and (iv) increase Basel III’s 10% CET1 threshold for non-significant investments in the capital of unconsolidated financial institutions assuming the final approach retains the proposal’s asymmetric treatment of holdings of TLAC debt (deducting holdings of TLAC debt that are not regulatory capital against Tier 2 capital),and particularly if it fails to include a broad market-making exemption.
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