8  The trigger for statutory resolution would be, broadly, that the conditions for the group being authorised as a bank or dealer were no longer met and there was no reasonable prospect of repair. It should be underlined that what is described here is nothing to do with so-called ‘contractual bailin’, which has been a source of confusing distraction over the past year or so. ‘Contractual bailin’ typically refers to bonds that convert into equity or write down under a trigger establishes purely in the contract documentation. But if the trigger is the firm’s capital ratio dipping below a high threshold, the bond is in fact for recovery not for handling abject distress. If, at the other end of the spectrum, the trigger is falling below a low capital ratio, there can be no assurance that the firm would survive in the markets long enough for the bond to be triggered before the firm had to go into statutory resolution. And if the suggestion were that the contractual trigger should give the regulators discretion, most Resolution Authorities would want to avoid writing down or converting bonds outside the statutory resolution process, since that provides protections for creditors, and gives the RA protections and powers for the achievement of a clear statutory objective established by the legislature. Bailin is not about a specific type of bond – a so-called ‘bailin bond’ – but about the application of a statutory resolution power to bonds of any kind within a statutory resolution.
Cross-border problems in resolving different subsidiaries or branches can also be sidestepped.6 Any reorganistion of the operating companies to address the underlying causes of the group’s failure can be made in an orderly fashion after the solvency position has been stabilised via the bailin. Multiple-Point-of-Entry Resolution Multiple-point-of-entry resolution is what it says on the tin. Rather than resolving the group as a single whole, it would be split up into its parts. That is quite probably appealing for those global groups comprising a bundle of regional, on-the-ground commercial and retail banks, operated as separate businesses financially in distinct legal structures but with shared operational and central services. 6  4  See FDIC and Bank of England (2012), Resolving Globally Active, Systemically Important Financial Institutions. BIS central bankers’ speeches  Of course, just saying ‘break up the group along regional lines’ does not amount to a resolution strategy. What happens to those regional parts? Healthy parts might be sold or be maintained as a residual group shorn of their distressed sister companies. Those distressed parts would need to be resolved, either via P&A or via bailin of the local subsidiary (if it had issued bonds to the market). I want to stress that last point because ‘bailin’ as a resolution tool should not become synonymous with top-down SPE resolutions: an MPE resolution could involve the bailin resolution-tool being applied to some parts of the group.