The presumption that holding company capital liabilities would be required in the first instance to absorb losses in a systemic financial firm will be critical in maintaining the confidence, and limiting the run potential, of customers, liquidity providers, and other creditors at the operating subsidiary level.
The single-point-of-entry approach does not involve a government guarantee that subsidizes systemic financial firms by protecting their investors from downside risk. The resolution would result in a recapitalization of a failed firm by the firm’s own investors.