But that could not be a complete solution as it would leave the hosts of the group’s foreign subsidiaries with exposure to Topco being unwilling or unable to pay when it mattered. For that reason, the LAC of Topco needs to be passed down to the ‘systemic’ or otherwise key operating subsidiaries, forming LAC in the subsidiaries themselves. This should probably be in the form of subordinated debt issued to the Topco with write down triggers that would enable losses exceeding the subsidiary’s equity base to be pushed up to the Topco. By transmitting the losses to Topco, the operating company is recapitalised. If Topco itself is bankrupt as a result, it can be resolved in a top-down bailin by the group’s home resolution authority of its own debt. That is the model set out in the paper FDIC/Bank of England issued last December.13 For MPE resolutions, there needs to be sufficient LAC in each of the key subsidiaries that are manifestly relevant to global financial stability. Some of the gone-concern LAC should be issued externally, so that bailin can effect a transfer of ownership. Beyond that, the host authorities of other subsidiaries may want to require sufficient externally issued goneconcern LAC, in order to be confident of being able to execute a local resolution if the subsidiary they host is systemic locally, ie a domestic SIFI.
It is an original member of the IMF and the World Bank, and is represented on the Executive Boards of both institutions together with seven other countries in the Nordic-Baltic Constituency. In line with its long-held policy of supporting multilateral institutions, Norway entered into a bilateral loan agreement with the IMF in the first half of 2009, when the IMF urgently needed to strengthen its lending capacity. Later in 2009, Norway agreed to raise its commitment under the New Arrangements to Borrow (NAB) and expanded its voluntary transactions in SDRs following the large allocations. It also committed to support IMF lending facilities for low-income countries. Thus, Norway has actively backed the multilateral responses to the global crisis, in large part stemming from decisions of the G20 at the London Summit in April 2009. Norway has a strong external and fiscal position based on large petroleum revenues. The lion’s share of the revenues is invested abroad through our sovereign wealth fund. 1  The membership of the G20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Korea, Japan, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union. The G20 was formed as a new forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization.