These strategies are broadly based on two approaches: •  The one called “single point of entry resolution” (SPE groups), in which resolution powers are applied at the top of the group by a single resolution authority;  •  And the one called “multiple point of entry resolution” (MPE groups), where resolution tools are applied to different parts of the group by two or more resolution authorities acting in a coordinated way. Of course, the choice of the strategy needs to take into account the structure and business model of each banking group. A “Single Point” strategy may be better suited to a firm that operates in a highly integrated manner (through, for example, centralised liquidity, trading, hedging and risk management). On the other hand, an “Multiple Point” strategy may be suitable for financial groups with a decentralised structure and greater financial, legal and operational separation along national or regional lines, with sub-groups of properly capitalised, self-funded subsidiaries, which have enough managerial resources as stand-alone businesses. The feasibility and credibility of the “Multiple Point” strategy will mostly rely on two main issues: •  First, an effective cross-border coordination based on the cooperation agreements, the resolution plans and with the involvement of the resolution authorities of the main jurisdictions in which the groups operate. •  Second, a balanced loss absorbing capacity allocation across the group, according to local business risk profile in each jurisdiction.
Luis M Linde: Key issues on today’s banking industry Closing speech by Mr Luis M Linde, Governor of the Bank of Spain, at the 6th Santander International Banking Conference, Madrid, 5 November 2013. *  *  *  I would like first to give my thanks to Banco de Santander for inviting me to take part in this final session of your 6th International Banking Conference, an excellent opportunity to review and assess key issues on today’s banking industry, which has to face, in the next few years, important regulatory and operational changes. I will comment on several elements of the new Basel III capital framework that remain contentious or are still open to discussion. Among those, the leverage ratio, the liquidity ratio and the very important issue of consistency in implementation. Then, I will move on to the Financial Stability Board’s work on resolution strategies and, finally, I will comment on the European Union Bank Recovery and Resolution Directive (BRRD), and one of the most important elements it contains, the bail-in tool. First, the leverage ratio, the ratio between Tier 1 capital and total balance-sheet and offbalance-sheet exposures not deducted from the calculation of Tier 1. This ratio is set, in principle, at a minimum of 3%. Its entry into force as an obligatory Pillar 1 ratio is foreseen to be in 2018. This new tool has been designed as a simple, transparent measure, not linked to risk, complementing and acting as a floor with respect to the risk-based minimum capital ratio.