Bail-in-able Debt and Fragility

Russell Cooper

Chapter 21 in Achieving Financial Stability:Challenges to Prudential Regulation, 2017, pp 295-304 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter studies the effects of bail-in-able debt (BID) on the fragility of banks. There are existing institutional structures, the Bank Recovery and Resolution Directive (BRRD) in the European Union and the Total Loss Absorbing Capacity (TLAC) rule in the US, that are built upon the role of BID in limiting government involvement in failed intermediaries. The basic idea is to create a separate class of bank liabilities which in normal times act as debt instruments but in the event of a bank failure convert to equity claims. A reduction in the claim on the bank implies that the depositor has, in effect, reduced the amount of bailout, if any, needed to rescue the bank…

Keywords: Money and Banking; International Banking; Financial Instititions; Banks; Regulations; Compliance; Financial Crisis; Great Financial Crisis 2008; Microprudential; Macroprudential; Financial Stability (search for similar items in EconPapers)
JEL-codes: E50 (search for similar items in EconPapers)
Date: 2017
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