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Analysis and opinion 16 Jan 2017

Keep calm. BBVA is MPE

The last global financial crisis demonstrated that the resolution of failing banks is a key component of financial regulation. With the goal of lowering the cost of banking crises and avoiding publicly funded bailouts, the Financial Stability Board (FSB) established a new framework for the resolution of financial institutions involving two types of strategies: Single Point of Entry (SPE) (applicable to groups with a centralized model) and Multiple Point of Entry (MPE) (applicable to groups with a decentralized model). Given its management model, MPE would be the most appropriate strategy for the BBVA Group.

Being an MPE bank means that if any of the Group’s subsidiaries have solvency, liquidity or operational problems, the resolution authority could liquidate this subsidiary without affecting the rest of the Group. Therefore, it is a secure model that ensures the viability of the Group, regardless of the performance of each of the subsidiaries. This strategy has advantages for the Group, as well as for maintaining financial stability.

A few weeks ago, BBVA’s Global Supervisory Relations team decided to design a mug with the following message:  “Keep Calm. BBVA is MPE.” It’s a play on words from the famous saying, “Keep Calm and Carry On,” designed by the British government in 1939 at the start of World War II to reassure its citizens.

Our mug intends to illustrate that the supervisor/resolution authority can “keep calm” thanks to the Group’s decentralized model (“BBVA is MPE”). In recent weeks I have had the opportunity to give these mugs to some supervisors, resolution authorities, regulators and other representatives from the financial sector and I have been surprised by the response. Everyone wants one!

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