Backgrounder: Draft Total Loss Absorbing Capacity (TLAC) Guideline (2027)

Overview

The Office of the Superintendent of Financial Institutions (OSFI) is launching a 60-day public consultation on proposed updates to its Total Loss Absorbing Capacity (TLAC) Guideline. The guideline applies to Canada's domestic systemically important banks (D-SIBs).

The TLAC Guideline helps ensure Canada's largest banks are prepared for a severe crisis. The guideline articulates expectations for the capital and other financial resources that banks should have to absorb losses and support an orderly resolution if they become non-viable.

The proposed updates build on the current guideline, published in 2018. The revisions clarify OSFI's expectations for external legal opinions related to Other TLAC Instruments^{Footnote 1} issued under foreign laws.

The proposed changes include:

• requiring D-SIBs to obtain an updated external legal opinion at least every two years
• setting out the minimum points of law those opinions should address
• clarifying expectations when banks issue additional debt under an existing indenture

Why it’s important

TLAC instruments help ensure that a D-SIB has the capacity to absorb losses in periods of severe stress. This supports an orderly resolution process, where required, and contributes to the resilience of Canada's financial system.

Some Other TLAC Instruments are issued under the laws of foreign jurisdictions. The proposed changes would:

• help ensure external legal opinions remain up to date
• provide clearer expectations about the legal issues those opinions should cover
• support a consistent approach across banks
• help OSFI assess whether instruments issued under foreign law meet the TLAC requirements
   

Next steps

The consultation is open until November 9, 2026. Stakeholders can submit comments to Consultations@osfi-bsif.gc.ca.

OSFI will consider feedback received during the consultation before finalizing the guideline. The final changes will come into effect on May 1, 2027.