Anatomy of a Bail-In

Thomas Conlon and John Cotter

Papers from arXiv.org

Abstract: To mitigate potential contagion from future banking crises, the European Commission recently proposed a framework which would provide for the $\textit{bail-in}$ of bank creditors in the event of failure. In this study, we examine this framework retrospectively in the context of failed European banks during the global financial crisis. Empirical findings suggest that equity and subordinated bond holders would have been the main losers from the 535 billion euro impairment losses realized by failed European banks. Losses attributed to senior debt holders would, on aggregate, have been proportionally small, while no losses would have been imposed on depositors. Cross-country analysis, incorporating stress-tests, reveals a divergence of outcomes with subordinated debt holders wiped out in a number of countries, while senior debt holders of Greek, Austrian and Irish banks would have required bail-in.

Date: 2014-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-eec
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Citations: View citations in EconPapers (29)

Published in Journal of Financial Stability, 2014

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http://arxiv.org/pdf/1403.7628 Latest version (application/pdf)

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Journal Article: Anatomy of a bail-in (2014)
Working Paper: Anatomy of a Bail-In (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1403.7628

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