spe resolution works downwards from the group ’ s top company – most simply, a pure holding company ( holdco ). losses in subsidiaries are first transferred up to holdco. if holdco is bankrupt as a result, the group needs resolving. the “ bailin ” tool is applied to holdco, with the equity being written off and bonds converted as necessary into equity to recapitalise the group. those bondholders become the new owners. the group stays together. under multiple - point - of - entry or mpe resolutions, by contrast, a group would be split up into some of its parts. healthy parts might be sold or be maintained as a residual group shorn of the accident of history arose from the mcfadden act ban on interstate banking. banks set up holding companies so that they could own banks in different states. a variant of that story applies to broker dealer groups. bis central bankers ’ speeches their distressed sister companies. the resolution of the distressed parts might be effected via bailin of bonds that had been issued to the market by a regional intermediate holding company. this is, of course, no more than a brief sketch, but i hope it will suffice for me to draw out some of the implications for the industry and regulators. 2 for many financial groups, it is fairly obvious which broad resolution strategy ( spe or mpe ) they are currently most suited to. but few major groups will escape having to make significant changes to their legal, organisational and financial structure to remove obstacles to effective resolution under that preferred strategy. for example, outside of the us, many “ spe groups ” will need to establish holding companies from which to issue bonds that can absorb losses and be converted into equity through a resolution. and even in the us, nearly all “ spe groups ” will need to ensure that there exists intra - group debt, issued by key subsidiaries around the world to the holding company, that can be written down when a distressed subsidiary would otherwise need to be resolved. for “ mpe groups ”, many will need to do more to organise themselves into well - defined regional and functional subgroups, perhaps with regional or functional intermediate holding companies, which could be subjected to spe resolutions. and these groups will need to ensure that common services, such as it, are provided by stand - alone entities under contracts that are robust enough to survive the break up of the group. there will be implications for the regulatory regime too. as i see

provide for the transparency that is essential for the proper assessment and management of risk and sets clear behavioural standards which do not unnecessarily distort business decisions but provide clear guidance to market participants - whether they are end - users or intermediaries - as to what is expected of them and what they can reasonably expect of others. the picture i have painted is one of challenge and change. the flip - side of course is great opportunity. in fact there has never been a time when the markets here in london did not face change and uncertainty. but there has never been a time either when you, we, all of us, did not rise to the challenge. i am sure we will all do so again - and i wish you all possible success.