February 12, 2015 / 3:17 PM / 3 years ago

SG falls short on TLAC, more funding ahead

LONDON, Feb 12 (IFR) - Societe Generale’s shortfall of total loss absorbing capacity under newly proposed rules to increase the safety of global banks could be as big as 20bn, the bank said in its fourth quarter presentation on Thursday.

The Financial Stability Board laid out plans last November that could require global systemically important banks, or G-SIBs, to have a safety buffer of TLAC equivalent to at least 16%-20% of risk-weighted assets from January 2019.

What banks will be able to include in this safety buffer is still undecided but Societe Generale said at the end of December, its total capital ratio was 14.3%, thereby showing a shortfall of around 5.2 percentage points assuming that the TLAC requirement will be set at 19.5% of RWAs.

The earliest date the TLAC requirements could kick in is 2019. The French lender did add, however, that its projection assumed that no senior debt would be taken into account, something that market participants believe is unlikely to be the final outcome.

Most believe that banks will be able to include some senior.

SG’s potential shortfall is not as big as BNP Paribas. BNP Paribas said last week that under its calculations, it may have as much as a 34bn shortfall to meet a minimum 16% TLAC ratio.

SG also gave an update on its funding programme so far this year. It has raised 3.3bn out of the 25bn-27bn it needs to raise in 2015. The average maturity is 2.7-years.

Last year, the bank raised EUR27bn in covered, senior and subordinated formats. (Reporting by Helene Durand, Editing by Alex Chambers, Sudip Roy)

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