ZBB 2024, 16
How to make a SPE resolution strategy work in the EU
When dealing with the resolution of a banking group under EU regulation there are two different approaches: Single point of entry (SPE)1 versus Multiple Point of Entry (MPE).2 In a MPE strategy, the resolution authority is taking separate resolution actions at the level of individual legal entities of the group. In a SPE strategy, the resolution authority is taking a resolution action at the level of a single entity, usually the parent undertaking, which, consequently, becomes the so called “resolution entity” 3 building together with its subsidiaries the “resolution group”.4
The general idea in a SPE strategy is, that losses at subsidiary level are first streamed up to the parent undertaking (resolution entity), i. e. capital is streamed down from the parent undertaking to the subsidiary to cover its losses and ensure its recapitalisation. This leads to losses at the resolution entity level, which, if the resolution entity meets the conditions for resolution, are taken care of by applying resolution tools to the resolution entity. This procedure is not necessarily a two-step approach but could also be completed in one go. In the following, we focus on different ways to upstream losses from the subsidiary to the parent undertaking and to recapitalise the subsidiary.
Contents
- I. Two models of resolution actions
- II. Executive order
- III. Exercising control over the institution
- IV. Group financial support agreements
- V. Conditions for resolution
- VI. Entity view vs. group view
- VII. Insolvency and bail-in hierarchy
- VIII. Conclusion
- *
- *)Dr. rer. nat., Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Frankfurt/M.
- **
- **)Dr. iur., LL.M. (Edinburgh), Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Frankfurt/M.
- 1
- 1)“Single point of entry (SPE)” means a resolution strategy involving the application of resolution powers by a single resolution authority at the level of a single parent undertaking or of a single institution subject to consolidated supervision (Article 2(5) of Commission Delegated Regulation (EU) 2016/1075).
- 2
- 2)“Multiple point of entry (MPE)” means a resolution strategy involving the application of resolution powers by two or more resolution authorities to regional or functional subgroups or entities of a group (Article 2(6) of Commission Delegated Regulation (EU) 2016/1075).
- 3
- 3)A resolution entity is a legal person established in a participating Member State of the Banking Union respectively in the European Union, which, in accordance with Article 8 of the SRMR (Article 12 of the BRRD), is identified by the resolution authority as an entity in respect of which the resolution plan provides for resolution action (Article 3(1)(24a) of the SRMR, Article 2(1)(83a) of the BRRD).
- 4
- 4)A resolution group is a resolution entity and its subsidiaries that are not (i) resolution entities themselves; (ii) subsidiaries of other resolution entities; or (iii) entities established in a third country that are not included in the resolution group in accordance with the resolution plan and their subsidiaries (Article 3(1)(24b) of the SRMR, Article 2(1)(83b) of the BRRD).
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