Macroprudential policy analysis and tools – Assessing the impact of bank capitalisation changes conditional on a bail-in versus bail-out regime

M. Gross and J. Población

Macroprudential Bulletin, 2017, vol. 4

Abstract: We have developed a flow-based contingent claims model for valuing bank debt and equity, along with the value of banks for the government. The model is intended to be useful for quantifying the impact of capital-based macroprudential policy measures on the various claims of banks, and their estimated probability of default and funding cost. We focus on the differential effect that capital ratio changes exert conditional on moving between bail-out and bail-in regimes, which amounts to varying the recovery rate of debt holders in the model. JEL Classification: G00

Keywords: capitalisation; financial stability; macroprudential policy; debt (search for similar items in EconPapers)
Date: 2017-12
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