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the diversifiable cash flow

Policy makers have debated two alternative resolution models, which are illustrated in Figure 1: (1) multiple-point-of-entry (MPOE) resolution, under which the global bank is split along jurisdictional lines and national regulators perform a separate resolution, drawing on loss-absorbing capital and liquidity separately held by national holding companies in each jurisdiction and (2) single-point-of-entry (SPOE) resolution, under which a global bank is resolved as a whole through a single global holding company that holds banking subsidiaries in multiple jurisdictions. The key difference is that, under MPOE, loss-absorbing capital is not shared across jurisdictions and no cross-jurisdictional transfers occur, whereas SPOE allows for the sharing of loss-absorbing capital and cross-jurisdictional transfers during resolution.Figure 1

MPOE and SPOE resolution The figure illustrates multiple-point-of-entry (MPOE) and single-point-of-entry (SPOE) resolution. Under MPOE (left panel), loss-absorbing capital, in the form of outside equity and long-term debt, is separately issued by national holding companies in each jurisdiction. In resolution the global bank is split up, and national regulators perform separate resolutions, drawing on the loss-absorbing capital available in each jurisdiction. Consequently, loss-absorbing capital is not shared, and no cross-jurisdictional transfers occur during resolution. Under SPOE (right panel), loss-absorbing capital is issued by a global holding company and is therefore shared across jurisdictions. Because the bank is resolved as a whole, in contrast to MPOE, SPOE allows for cross-jurisdictional transfers during resolution.

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MPOE and SPOE resolution The figure illustrates multiple-point-of-entry (MPOE) and single-point-of-entry (SPOE) resolution. Under MPOE (left panel), loss-absorbing capital, in the form of outside equity and long-term debt, is separately issued by national holding companies in each jurisdiction. In resolution the global bank is split up, and national regulators perform separate resolutions, drawing on the loss-absorbing capital available in each jurisdiction. Consequently, loss-absorbing capital is not shared, and no cross-jurisdictional transfers occur during resolution. Under SPOE (right panel), loss-absorbing capital is issued by a global holding company and is therefore shared across jurisdictions. Because the bank is resolved as a whole, in contrast to MPOE, SPOE allows for cross-jurisdictional transfers during resolution.