The Basel Committee has issued a consultation on the prudential treatment of banks’ investments in holdings of TLAC qualifying instruments. The proposal is for banks to deduct from their regulatory capital their holdings of TLAC instruments, subject to thresholds. It also addresses the treatment of holdings of instruments that rank pari passu to TLAC in the creditor hierarchy. The objective of the proposed treatment is to support the TLAC regime by reducing the risk of contagion if a G-SIB should enter resolution. The TLAC regime also necessitates changes to Basel III to specify how G-SIBs must take account of the TLAC requirement when calculating their regulatory capital buffers. In particular, any Common Equity Tier 1 that is being used to meet the TLAC requirement cannot be used to meet the regulatory capital buffers. The proposed changes to Basel III to give effect to this requirement are set out in the consultative document. Consultation closes on 12 February 2016. (Source: BIS Consults on TLAC Holdings)