Washington, D.C. – The Bipartisan Policy Center’s Financial Regulatory Reform Initiative Failure Resolution Task Force reiterates its strong support for the Federal Deposit Insurance Corporation’s (FDIC) Single Point of Entry (SPOE) strategy, while at the same time suggesting areas in which the Notice could be strengthened.
In comments submitted today on the FDIC’s Notice on The Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy, the task force outlines the following principles that should be adopted or strengthened in the final FDIC rule:
Predictability and Certainty: The task force encourages the FDIC to announce a strong presumption in favor of using SPOE resolution to resolve highly complex global SIFIs in a manner that maximizes their value for the benefit of their stakeholders.
Limit on Discretion to Discriminate: The task force asks the FDIC to state clearly that it will not discriminate among similarly situated creditors at the parent holding company level unless necessary to maximize the recovery of the creditors left behind in the receivership. Doing so will promote both market discipline and financial stability by allowing long-term unsecured debt holders to estimate their potential losses with greater certainty.
Value Maximization Duty: The FDIC should make clearer its intent to preserve the going value of any recapitalized groups.
Liquidity, not Capital: The task force report recommends that the FDIC confirm “that the Orderly Liquidation Fund (OLF) will not be used to provide capital that insulates shareholders or creditors against losses.”
Reconciling SPOE with the Bankruptcy Code: The task force urges the FDIC to play a constructive and proactive role in advocating for amendments to the Bankruptcy Code to reduce the need to invoke the authority contained within Dodd-Frank’s Orderly Liquidation Authority.