Those bondholders become the new owners. The group stays together. Under multiple-point-of-entry or MPE resolutions, by contrast, a group would be split up into some of its parts. Healthy parts might be sold or be maintained as a residual group shorn of  1  The accident of history arose from the McFadden Act ban on interstate banking. Banks set up holding companies so that they could own banks in different states. A variant of that story applies to broker dealer groups. BIS central bankers’ speeches  1  their distressed sister companies. The resolution of the distressed parts might be effected via bailin of bonds that had been issued to the market by a regional intermediate holding company. This is, of course, no more than a brief sketch, but I hope it will suffice for me to draw out some of the implications for the industry and regulators.2 For many financial groups, it is fairly obvious which broad resolution strategy (SPE or MPE) they are currently most suited to. But few major groups will escape having to make significant changes to their legal, organisational and financial structure to remove obstacles to effective resolution under that preferred strategy. For example, outside of the US, many “SPE groups” will need to establish holding companies from which to issue bonds that can absorb losses and be converted into equity through a resolution.
My final point, therefore, is that the authorities will have no excuse if they don’t solve the TBTF problem through resolution regimes and reforms. The necessary technology is clear. The necessary restructuring of firms is clear. The necessary degrees and forms of cross-border co-operation are clear. It is a matter of: just do it. 8  Committee on Payment and Settlement Systems (CPSS) and International Organization of Securities Commissions (IOSCO). 4  BIS central bankers’ speeches