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UniCredit’s restructuring programme in Italy

The proposed solution to this challenge is to perform a G-SIB resolution through a liability-side restructuring of the failing institution . Specifically, troubled operating subsidiaries of a G-SIB are recapitalized by writing down long-term liabilities known as TLAC (“total loss-absorbing capital” in the form of equity and subordinated long-term debt) issued by a nonoperating holding company. Crucially, recapitalization via a nonoperating holding company allows the G-SIB’s operating subsidiaries to remain open for business as usual during the resolution and protects the operating subsidiaries’ runnable short-term liabilities, thereby preventing destabilizing runs on the G-SIB’s operations.

Policy makers have debated two alternative resolution models, which are 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.