Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154443
Authors: 
Hüser, Anne-Caroline
Hałaj, Grzegorz
Kok, Christoffer
Perales, Cristian
van der Kraaij, Anton
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2010
Abstract: 
We present a tractable framework to assess the systemic implications of bail-in. To this end, we construct a multi-layered network model where each layer represents the securities cross holdings of a specific seniority among the largest euro area banking groups. On this basis, the bail-in of a bank can be simulated to identify the direct contagion risk to the other banks in the network. We find that there is no direct contagion to creditor banks. Spill-overs also tend to be small due to low levels of securities cross-holdings in the interbank network. We also quantify the impact of a bail-in on the different liability holders. In the baseline scenario, shareholders and subordinated creditors are always affected by the bail-in, senior unsecured creditors in 75% of the cases. Finally, we compute the effect of the bail-in on the network topology in each layer. We find that a bail-in significantly reshapes interbank linkages within specific seniority layers.
Subjects: 
bail-in
financial networks
policy simulation
resolution regimes
systemic risk
JEL: 
G01
G18
G21
C63
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2732-1
Document Type: 
Working Paper

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