These criteria, related to each step of the process, should be implemented in a strict and effective manner, in order to provide the countries concerned with the external constraints necessary to bring their economies into line with the respective standards and the final goal of EMU, while also avoiding any discrimination. Against the background of different starting points and possibly different lead-times for progress towards real and nominal convergence, a plurality of approaches should be feasible without compromising equality of treatment. This may apply, in particular, to the timing of the individual steps towards accession. In accordance with the Treaty establishing the European Community, the Eurosystem will always focus on the maintenance of price stability in the euro area. Hence, our involvement in the accession process, including our technical assistance, and any arrangement or other forms of cooperation with accession countries, must be without prejudice to the Eurosystem’s independence and its primary objective. BIS Review 116/1999  4  Over time, the Eurosystem – like other EU institutions – will face the necessity of institutional adjustments required by enlargement. These adjustments should preserve the efficient functioning of the Eurosystem and its ability to maintain price stability in an enlarged euro area. In the case of previous enlargements, the entry of new Member States often brought about so-called “arithmetical adjustments” to the composition of EU institutions. However, an enlargement by as many as 12 new countries may require more substantial adjustments.
I don’t mean it would be completely smooth right now; it would be smoother in a year or so as more progress is made. But in extremis, it could be done now. That surely is a massive signal to bankers and markets. Europe has not yet reached the same point, but contrary to some commentary is not far behind. The necessary legislative regime is close to completion. In contrast to the US, however, many of the largest European – including UK – banking groups will need to reorganise in order to make themselves susceptible to either Single Point of Entry or Multiple Point of Entry resolution. That brings me to my second point. (2)  The Single Point of Entry versus Multiple Point of Entry resolution strategy distinction may be the most important innovation in banking policy in decades  We will learn to speak of banks and dealers as either “SPE groups” or “MPE groups”. Some technical developments don’t matter hugely. This one does. A lot will follow from it, as I will sketch in a moment. But first I should recap the difference between SPE and MPE resolution strategies. A single-point-of-entry or SPE resolution works downwards from the group’s top company – most simply, a pure holding company (Holdco). Losses in subsidiaries are first transferred up to Holdco. If Holdco is bankrupt as a result, the group needs resolving. The “bailin” tool is applied to Holdco, with the equity being written off and bonds converted as necessary into equity to recapitalise the group.