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Anatomy of a Bail-In

Thomas Conlon () and John Cotter ()

No 201405, Working Papers from Geary Institute, University College Dublin

Abstract: To mitigate potential contagion from future banking crises, the European Commission recently proposed a framework which would provide for the 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 nancial crisis. Empirical ndings suggest that equity and subordinated bond holders would have been the main losers from the e535 billion 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.

Keywords: Bank Resolution; Bail-In; European Bank Failure; Global Financial Crisis; Impairment Charges. (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-02-21
New Economics Papers: this item is included in nep-ban, nep-cba and nep-eec
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http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201405.pdf First version, 2014 (application/pdf)

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Journal Article: Anatomy of a bail-in (2014) Downloads
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