Bail In - Total loss-absorbing capital (TLAC)

In November 2014, Financial Stability Board proposed a minimum total loss absorbing capacity requirement ,TLAC,to make sure that world's 30 most systemically important banks (G-Sibs), BCBS defined these banks as Too big to fails, can be stabilised and shut down in orderly way with out taxpayer bailouts. The TLAC rule would require banks to issue ordinary shares, subordinated debt and other potentially loss-absorbing securities equivalent to as much as 15-20% of their assets weights for risks. 

Basel III rules require banks to meet a minimum total capital ratio of 10.5% by 2019 – though in some jurisdictions the minimum ratio is far higher. The proposed minimum TLAC requirements for G-Sibs unveiled at the G20 Brisbane summit in November 2014 is 16% to 20% of a group's consolidated risk-weighted assets. This proposal was under consultation until February 2, 2015, when the requirement was finalised.The TLAC rule is set to take effect in 2019 at the earliest.

This the concept of 'bail in' spearheaded during the Lehman's collapse. Wilson Ervin, now credit suisse's vice chairman, explains how his Lehman experience led to the creation of bail-in, and describes some of the innovations by the Swiss regulators.

Initially FSB excluded all structured notes/securities from the TALT requirement,  now structured notes are being considered to the extent that the repayment of the principal at maturity is unconditional and not contingent on any derivative-linked feature, reported by Bloomberg. 

COCO bonds raised by many banks can be considered as bail-in type securities. Regulators needs to increase the oversight on COCO bonds as risk profile of these bonds are complex as suggested by FT.