Does the Single Point of Entry Strategy Eliminate “Too Big to Fail”?

Financial Services & E-Commerce Practice Group Teleforum

In December 2013, the Federal Deposit Insurance Corporation released a proposal on the so-called “Single Point of Entry” (SPOE) strategy as a means of resolving large failing banks without financial-market disruption. In a recent paper, AEI scholars Paul Kupiec and Peter Wallison raised questions about legal support for the SPOE strategy in Title II of the Dodd-Frank Act, whether the strategy can be used for resolving the largest failed banks, and the economic consequences of using the SPOE approach to attenuate the systemic risk of a large-bank failure. To facilitate a SPOE resolution, regulators recently proposed new requirements that large financial firms have enough long-term debt and equity — or total loss absorbing capacity — to cover potential losses and bank recapitalization. Mr. Kupiec and Mr. Wallison’s paper questions whether these measures will allow authorities to resolve large banks without a bailout or disorderly break-up.

Mr. Kupiec and Mr. Wallison will present their paper and field audience questions during a live Teleforum conference call.

• Paul H. Kupiec, Resident Scholar, American Enterprise Institute
• Hon. Peter J. Wallison, Arthur F. Burns Fellow in Financial Policy Studies, American Enterprise Institute

In December 2013, the Federal Deposit Insurance Corporation released a proposal on the so-called “Single Point of Entry” (SPOE) strategy as a means of resolving large failing banks without financial-market disruption. In a recent paper, AEI scholars Paul Kupiec and Peter Wallison raised questions about legal support for the SPOE strategy in Title II of the Dodd-Frank Act, whether the strategy can be used for resolving the largest failed banks, and the economic consequences of using the SPOE approach to attenuate the systemic risk of a large-bank failure. To facilitate a SPOE resolution, regulators recently proposed new requirements that large financial firms have enough long-term debt and equity — or total loss absorbing capacity — to cover potential losses and bank recapitalization. Mr. Kupiec and Mr. Wallison’s paper questions whether these measures will allow authorities to resolve large banks without a bailout or disorderly break-up.

Mr. Kupiec and Mr. Wallison will present their paper and field audience questions during a live Teleforum conference call.

• Paul H. Kupiec, Resident Scholar, American Enterprise Institute
• Hon. Peter J. Wallison, Arthur F. Burns Fellow in Financial Policy Studies, American Enterprise Institute

Call begins at 3:00 p.m. Eastern Time.

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