The Bail-in Effect: How the Cost of Funding Through Bonds has Changed After the Introduction of the BRRD

Fabrizio Crespi () and Danilo V Mascia ()
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Fabrizio Crespi: University of Cagliari Department of Economics and Business
Danilo V Mascia: University of Cagliari Department of Economics and Business

Chapter Chapter 4 in Bank Funding Strategies, 2018, pp 93-116 from Palgrave Macmillan

Abstract: Abstract By employing data from a unique hand-collected dataset, in this Chapter we show that, since the adoption of the BRRD in the European Union, Italian banks—probably motivated by the need to increase the appeal of their bail-inable debt instruments—have been forced to offer higher yields (compared to the yields offered by government securities with corresponding maturities) to bondholders, with the consequence of an increase in their cost of funding. Finally, we conclude this final Chapter by offering some very recent examples about the application of the BRDD rules in Italy—which have either led to liquidation, resolution, or precautionary recapitalization cases—and the related side effects generated to bank bondholders.

Keywords: Bond yields; Cost of funding; BRRD; Bail-in tool; Resolution; Liquidation (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-69413-9_4

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DOI: 10.1007/978-3-319-69413-9_4

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