As many of you know, in the United States, the Federal Deposit Insurance Corporation is developing a preferred approach to resolution for such rare cases: the singlepoint-of-entry (SPOE) approach. This approach may be gaining some traction internationally. In my view, SPOE can be a classic “simplifier”, making theoretically possible something that seemed impossibly complex.
Under the SPOE approach, the home country resolution authority for a failing banking firm would effect a creditor-funded parent company recapitalization of the failed firm. To do so, the resolution authority would first use available parent company assets to recapitalize the firm’s critical operating subsidiaries, and then would convert liabilities of the parent company into equity of a surviving entity.