In addition, in order to ensure that there is enough recapitalisation capacity in resolution, one-third of the minimum TLAC requirement is expected to be covered with instruments other than CET1 (that is, debt). It is important to bear in mind that the TLAC establishes a common minimum global requirement and that national authorities have the right at any time to apply higher requirements in their jurisdictions. The TLAC is a new prudential requirement that has different objectives than the capital ratio. Regulatory capital is mainly to absorb losses in a going-concern situation, whereas TLAC is meant to ensure loss absorption in gone-concern situations (that is, beyond the point of nonviability). I should add that, in a resolution context, the location of loss absorbing resources becomes very important and, for this reason, the TLAC standard gives guidance on how these resources should be distributed within the banking group. This highlights another important difference between the capital framework and TLAC: the location of resources. While the former is required on a consolidated basis for the group as a whole, TLAC is required where resolution takes effect and where critical functions are performed. One of the most complex issues in the design of the TLAC was the need to ensure consistency between the two main banking resolution strategies: the Single Point of Entry and the Multiple Point of Entry.
In particular, the Financial Stability Board has claimed that the problems of misconduct in some financial institutions have the potential to create systemic risks, considering the scale of the associated fines and sanctions which could run into the millions and also the negative impact on confidence. This is a serious threat that must be properly addressed. The banking business is about trust; if confidence in the financial institutions and markets is lost, the potential for finance to serve the real economy and foster growth will be undermined. In response to this threat, a new area of FSB-coordinated work has been set up. An action plan has been launched which, among other measures, explores the pivotal role played by compensation structures and, more generally, corporate governance frameworks in preventing and mitigating bad practice. The FSB is examining whether the reforms already in place, mainly as a result of principles and standards issued by the OECD, the Basel Committee and the FSB itself, have proven effective or if, on the contrary, more preventive measures are required. 5. Closing remarks  Let me conclude. Back in 2009 the FSB and other standard-setting bodies (such as the Basel Committee) received a mandate from the G20 to restore the resilience of the financial markets and make future financial crises less frequent and costly. Most of the agreed postcrisis measures are now in place and have already begun to deliver benefits in terms of bank resilience and financial stability. The Basel Committee intends to finalise the Basel III framework in 2016.