4.3.5 Resolution of a (cross-border) banking group

Banks are often organised as a banking group rather than as a single entity. This might complicate the resolution of the bank. Especially the resolution of a cross-border banking group can be complicated.1 There are essentially two approaches to the resolution of a (cross-border) banking group: Single Point of Entry (SPE) and Multiple Point of Entry (MPE).2 SPE means that the resolution tools are applied at the level of the top parent or holding company, and by a single resolution authority.3 MPE means that the resolution tools are applied to different parts of the group, and by two or more resolution authorities.4 Whether several resolution authorities are involved thus depends on whether the resolution follows a SPE approach or MPE approach. In that regard, the SPE approach has been called a ‘universal approach’, and the MPE approach a ‘territorial approach’.5

The BRRD does not prescribe a specific resolution strategy. Rather, it allows for a SPE resolution, a MPE resolution or a combination of both.6 Which resolution strategy is most effective depends on how the banking group is structured.

In a MPE resolution, the resolution tools are applied to different parts of the banking group. A MPE approach is effective when the banking group’s operations are divided into several clearly identifiable subgroups.7 By contrast, when the banking group operates in a very integrated manner, a SPE approach might be more appropriate.

In a SPE resolution, the losses in the group entities should be absorbed by the top parent: an “upstream of the losses” from the subsidiaries to the parent level.8 The SPE approach is thus only effective when there is sufficient loss- absorbing capacity at the parent level.9 Another element that makes the SPE approach effective is when the top parent is a non-operating holding company. In such a case, the SPE resolution entails that the ‘operating liabilities’ (i.e. the liabilities of the operating group entities) are protected relative to the ‘capital liabilities’ (i.e. the liabilities of the top company).10