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Bail-In: A Sustainable Mechanism for Rescuing Banks

Marc Sanchez-Roger (), María Dolores Oliver-Alfonso () and Carlos Sanchís-Pedregosa ()
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Marc Sanchez-Roger: Faculty of Economics and Business, University of Seville, Avd. Ramón y Cajal, 1, 41018 Sevilla, Spain
María Dolores Oliver-Alfonso: Faculty of Economics and Business, University of Seville, Avd. Ramón y Cajal, 1, 41018 Sevilla, Spain
Carlos Sanchís-Pedregosa: Faculty of Economics and Business, University of Seville, Avd. Ramón y Cajal, 1, 41018 Sevilla, Spain

Sustainability, 2018, vol. 10, issue 10, 1-18

Abstract: Until the Great Recession, rescuing banks with taxpayers’ money had been the preferred way to deal with banking crises. The dramatic effects of these practices on the real economy highlighted that bailouts are not a sustainable method to resolve troubled banks going forward. As a result, a new regulatory framework has been proposed, forcing the financial industry to move from “bailout” to “bail-in.” Understanding the implications of such a change is key to ensuring the success of these new banking rules. This article aims to build up a comprehensive and unbiased set of research articles in order to draw conclusions about the current status of the academic literature in the field of capital and loss absorption requirements. A research agenda on the topic is also proposed. The methodological approach undertaken is based on ProKnow-C (Knowledge Development Process-Constructivist). We also contribute to the development of Proknow-C methodology by adding a cross-reference extension to the original framework. The results of our analysis point out that further research has to be undertaken on the subject of loss absorption requirements.

Keywords: sustainable finance; banking regulation; ProKnow-C; capital requirements; loss absorption requirements; banking system (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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