Systemic Implications of the European Bail-In Tool: a Multi-Layered Network Analysis

Grzegorz Halaj, Anne-Caroline Hüser, Christoffer Kok, Cristian Perales and Anton van der Kraaij

Financial Stability Review, 2016, vol. 1

Abstract: The new bail-in tool in the EU bank resolution toolkit is an important step forward to safeguard financial stability in Europe, notably in relation to mitigating moral hazard and other problems inherent in a strong reliance on bailouts. At the same time, it is important to understand the potential contagion channels in the financial system following a bail-in and prior to resolution in order to assess potential systemic implications of the use of the bail-in tool. This special feature outlines salient features of the new requirements and then presents a multi-layered network model of banks’ bail-inable securities that could help in gauging potential contagion risk and, prior to a resolution, identifying mitigating measures to avoid systemic implications. JEL Classification: G00

Keywords: bailout; financial stability; moral hazard; systemic risk (search for similar items in EconPapers)
Date: 2016-05
Note: 508948
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