Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/168036
Authors: 
Tröger, Tobias H.
Year of Publication: 
2017
Series/Report no.: 
SAFE Working Paper Series 179
Abstract: 
This paper analyses the bail-in tool under the BRRD and predicts that it will not reach its policy objective. To make this argument, this paper first describes the policy rationale that calls for mandatory private sector involvement (PSI). From this analysis the key features for an effective bail-in tool can be derived. These insights serve as the background to make the case that the European resolution framework is likely ineffective in establishing adequate market discipline through risk-reflecting prices for bank capital. The main reason for this lies in the avoidable embeddedness of the BRRD's bail-in tool in the much broader resolution process which entails ample discretion of the authorities also in forcing private sector involvement. Finally, this paper synthesized the prior analysis by putting forward an alternative regulatory approach that seeks to disentangle private sector involvement as a precondition for effective bank-resolution as much as possible from the resolution process as such.
Subjects: 
bail-in
private sector involvement
precautionary recapitalization
cross-border insolvency
market discipline
JEL: 
G01
G18
G21
G28
K22
K23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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