Barclays is expecting to easily transform its stack of outstanding debt into securities that are compliant with new global standards for loss absorbency, the lender said in its first-half results presentation.
While global banks are still waiting for the termsheet on Total Loss Absorbing Capacity (TLAC) to be finalised by the Financial Stability Board at the end of 2015, some are already making plans around how they will address those needs now.
In its presentation, the UK lender said it was expecting to conform with TLAC primarily through the refinancing of operating company debt with senior unsecured paper issued out of its holding company.
By its nature, issuance at the holding company level is structurally subordinated to that out of the operating company.
“Around half of our opco vanilla term senior unsecured debt matures before 2019 and could therefore be refinanced at holdco,” Barclays said.
As things stand, Barclays has £22bn of vanilla term senior opco debt outstanding and £5bn of holdco debt. It said it would have further flexibility to meet future requirements by partially refinancing its £33bn of opco structured notes through vanilla holdco senior unsecured term debt.
Barclays said it did not intend to use holdco senior unsecured debt proceeds to subscribe for opco liabilities on a subordinated basis until required to do so by end-state TLAC requirements.
Barclays currently has £4bn of holdco AT1 debt and £7bn of opco AT1. In Tier 2, it has £12bn of opco debt and £1bn of holdco debt.
The Financial Stability Board laid out plans in November last year 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.
Barclays said that based on its current interpretation of TLAC requirements, its TLAC ratio is 25%, assuming that all Barclays Bank vanilla term senior unsecured debt is refinanced through holdco and is subordinate to opco operating liabilities.
The bank is planning to raise between £10bn and £15bn of gross issuance in 2015 across public and private senior unsecured, secured and subordinated debt. Of this, it has issued £6bn.
