Australia’s bank levy could squeeze TLAC drive

Issuing Tier 2 and senior unsecured debt will become more expensive for the top four banks in the country

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Big squeeze: "With this additional cost, does it make sense to hold such a buffer?” asks a senior manager

A new bank levy could prompt Australian banks to adjust their capital structure, and may ultimately undermine the prudential objective of increasing the capital and bail-in debt buffers that banks hold against the possibility of failure.

The proposed levy, which was put before Parliament on May 30, imposes an annual tax of 0.06% on certain bank liabilities. These include senior debt, certificates of deposit and Tier 2 capital instruments, but exclude liabilities that are most important for bank

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