Building on an initial accord with the U.K., the FDIC is now seeking comment on the policy and practical issues that must be addressed before its single-point-of-entry (SPOE) resolution protocol for systemically-important financial institutions (SIFIs) can be considered a viable resolution strategy. In SPOE, SIFIs will have issued sufficient debt and equity for the FDIC to recapitalize their subsidiaries quickly and in an orderly fashion to avoid “fire sales” or other market actions that create contagion risk or prevent SIFI and their subsidiaries from performing vital financial-market and economic services. Numerous procedural complexities to SPOE are explored and, the FDIC hopes, resolved in this paper. However, policy questions remain on which comment is solicited. These include the extent to which a SIFI’s subsidiaries would become de facto too-big-to-fail (TBTF) entities, remaining SIFI funding advantages, FDIC discretion to treat similarly-situated creditors differently, and the ability of SPOE to execute an orderly resolution for a cross-border financial institution. Although SPOE is to handle all SIFIs, its structure is in many ways premised on the SIFI being a bank holding company, raising questions about its functionality for any non-bank SIFIs, although the FDIC does not raise these in its request for comment.
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