The bail-in credibility: barking dogs seldom bite

Giulio Velliscig (), Maurizio Polato (), Josanco Floreani () and Enrica Bolognesi ()
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Giulio Velliscig: University of Udine
Maurizio Polato: University of Udine
Josanco Floreani: University of Udine
Enrica Bolognesi: University of Udine

Journal of Banking Regulation, 2024, vol. 25, issue 1, No 1, 19 pages

Abstract: Abstract This paper studies the senior unsecured bondholders’ bail-in expectations and market monitoring following bail-in legislative events aimed at introducing new tools for subordination. We measure bail-in expectations using a difference in differences approach that compares the reaction to bail-in events of senior unsecured bonds to the reaction of non-bailinable bonds. Similarly, we measure senior unsecured bondholders’ monitoring activity by using a triple differencing analysis that compares the yield-risk sensitivity reaction of senior unsecured bonds with respect to that of non-bailinable bonds. Our results indicate unaffected bail-in expectations by senior unsecured bondholders who, accordingly, do not enhance their pricing of banks’ risk.

Keywords: Bail-in; Credibility; Unsecured senior bonds; Market monitoring; Bondholder’s expectations (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41261-022-00210-7

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