Single point of entry places bank holding companies as the source of strength for insured depositories and nonbank affiliates. As a result, a range of regulations may be redundant or have unintended cumulative effects. The current state of regulation should be carefully analyzed to avoid constraining economic growth.
While single point of entry may be a preferred resolution strategy for certain banks, multiple point of entry may be more appropriate for those banks with a significant global footprint and many subsidiaries.
Uncertainty about how the FDIC would apply the Orderly Liquidation Authority weakens the viability of post-crisis reform. The FDIC should build on its recent “Single Point of Entry Notice” by clarifying a “preferred path” for Title II resolutions.
Though there is widespread agreement on the need for a viable resolution framework, overlapping authorities and legal confusion stand in the way of a cohesive approach. Regulators, banks, and other stakeholders must work together to craft a globally-viable resolution regime before it’s too late.
Financial market infrastructures are hubs that enable the global flow of capital. Maintaining their continuity in the face of a G-SIB’s failure is critical to sustaining economic stability. New rules promise to make FMIs more resilient while minimizing the chances that they could become propagators of financial stress.