Resolving Globally Active, Systemically Important, Financial Institutions ,a joint paper by the Federal Deposit Insurance Corporation and the Bank of England 10 December 2012;Please read this paragraph .... Both the U.S. and U.K. resolution proposals are designed to maintain financial stability by ensuring that critical business functions continue to be performed. Critical business functions are generally performed at the level of the operating subsidiaries—assets of the holding companies of U.S. and U.K. G-SIFIs tend to comprise little more than the equity stakes in the operating subsidiaries. The newly resolved group would be solvent and viable, and should be in a position therefore to access market funding or, if necessary, funding from the authorities as discussed above. Liquidity will be downstreamed in a “business as usual” manner to the operating subsidiaries immediately following the resolution weekend. As described above, the balance sheets of the operating subsidiaries should be broadly unaffected by the resolution action at the top of the group. To recapitalize the operating subsidiaries that had incurred losses, the equity or debt held by the parent in those subsidiaries would need to be written down. The parent and, indirectly, the subsidiary operating companies may also be subject to change of control procedures arising from a switch of ownership from the existing shareholders to creditors.11 Provision of critical shared services across the group should be unaffected. fdic.gov/about/srac/2012/gsifi.pdf
Posted on: Sat, 20 Jul 2013 15:33:20 +0000
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