One of the key pillars of Title II is that, unlike a bankruptcy proceeding, the FDIC will have access to liquidity from the U.S. Treasury to help ensure an effective resolution. While this access provides significant support for an effective resolution, it will still be important for the resolution authorities to provide clarity about the timing and the amount of liquidity resources that will be made available after a firm enters into resolution. This clarity will likely be necessary in order to calm creditors and markets at the time of resolution. Under the single point of entry framework, the intent is to create a highly capitalized bridge entity so that counterparties will be willing to stay engaged based upon the improved creditworthiness of the bridge parent and its recapitalized subsidiaries. If successful, this will reduce the need for the up-front provision of external liquidity resources. Nevertheless, to make the viability of the bridge entity fully credible, market participants must believe that the bridge company has access in a timely way to whatever additional liquidity resources might prove necessary. In addition, under the Dodd-Frank Act, Title II is not the baseline or preferred approach for dealing with the failure of a large complex firm. For a firm to go through Title II, a determination must first be made that the failure of the firm and its resolution would have serious adverse effects on U.S. financial stability under the insolvency law that would otherwise apply.
Given the trade and financial linkages of this region with the European economy, it is of interest to also shed some light on the Europe’s growth prospects. It is encouraging that the economic recovery is expected to proceed in the monetary union, at a growth rate of slightly below 2%. It is to be supported by the ECB’s monetary policy measures, by the earlier progress made with fiscal consolidation and structural reforms, and low oil prices as well. However, similar to the global outlook, the economic recovery in the euro area is moderate and downside risks prevail. They pertain to the global uncertainties that were mentioned previously, as well as to broader geopolitical risks. It seems that the possibility of prolonged slow growth is high, and this could affect the potential to grow, as well. This asks for policies of supporting long-term economic growth, which typically calls for structural measures – more innovation; technology sharing; support to the global regulatory reforms in order to improve the resilience of the financial system; investments in human capital, education, health and infrastructure. At the end, let me once more wish you a pleasant stay in Macedonia and a successful meeting. I hope that you will have a chance to see Skopje and that you will enjoy it. 2  BIS central bankers’ speeches