Anatomy of a Bail-in

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Title: Anatomy of a Bail-in
Authors: Conlon, Thomas
Cotter, John
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Date: 1-Dec-2014
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 financial crisis. Empirical findings suggest that equity and subordinated bond holders would have been the main losers from the €535 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.
Funding Details: Science Foundation Ireland
Type of material: Journal Article
Publisher: Elsevier
Journal: Journal of Financial Stability
Volume: 15
Start page: 257
End page: 263
Copyright (published version): 2014 Elsevier
Keywords: Bank resolutionBail-inEuropean bank failureGlobal financial crisisImpairment charges
DOI: 10.1016/j.jfs.2014.04.001
Language: en
Status of Item: Peer reviewed
Appears in Collections:FMC² Research Collection

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