It draws on two stylised approaches to resolution: a so-called “single point of entry” approach, under which resolution of a whole group is executed, primarily by the home authority and mainly at the level of the parent or holding company; and, secondly, a “multiple point of entry” approach whereby co-ordinated actions are taken by a number authorities along national, regional or functional lines. There is, of course, a spectrum between those two poles. Identifying the resolution strategy that is most likely best suited to each specific firm is very important. The strategy must be relatively easy to understand – a strategy that cannot be explained concisely to top officials in central banks and regulators is not a strategy at all. But although authorities should try to identify a preferred strategy and should be as transparent as possible, I should caution that what turns out to be the best approach in the event of distress will depend on the circumstances. The suggestion of a “Presumptive Path”, being aired by some in the market, is somewhat unrealistic, at least in its strongest form. Public authorities with statutory obligations to maintain stability cannot bind themselves to detailed strategies that in the event might not work as well as an alternative. At the planning stage, whether a single- or a multiple-point-of-entry strategy looks more feasible will depend upon a group’s organisational and financial structure. It is likely that some groups will need to adapt themselves in order to remove impediments to resolution. Much of that will be case by case.
They estimated that there were an additional 2.4 million borrowers estimated to be in “near negative equity” where the borrower has less than 5 percent equity remaining. Declining house prices will push these near negative equity borrowers into negative equity. This increases the risk that these borrowers will default on their mortgages either out of necessity – say as the result of a job loss – or out of choice, which is called strategic default as borrowers determine that there is little economic advantage to keep paying the mortgage. Longer delays in the foreclosure process further increase the incentive for a borrower to strategically default by extending the period of time that they can live “rent free” in the house. In addition, declining house prices increase the expected losses on those mortgages that do default. Problems in housing markets can impact economic growth. Housing directly effects growth through incentives for builders to build new houses. Housing starts will likely remain depressed as long as house prices are declining. Falling house prices can also negatively impact consumption growth to the extent that homeowners increase their savings in an effort to offset declines in their housing wealth. The degree to which housing markets deteriorate over 2011 and the impact that this will have on overall growth is hard to predict with any accuracy. The most likely outcome is that the economy will continue to improve as the year progresses despite the ongoing drag from housing.