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Bail-in or Bail-out: The Case of Spain

Author

Listed:
  • Philipp Bagus
  • Juan R. Rallo Julián
  • Miguel A. Alonso Neira

Abstract

In this article we analyse the feasibility of a bail-in for Spain. After a detailed analysis of the origins of the Spanish banking crisis and the government’s response in the form of a bail-out by taxpayers in 2012, we investigate whether a bail-in would have been feasible instead. The bail-in procedure recently announced by the Council of the European Union provides for a bail-in, although important liabilities are excluded. We criticize these exclusions and the discretionary power given to governments under the Council’s plan because it could lead to the use of (foreign) taxpayers’ money. However, following the path and rules set out by the Council we can show that a bail-in would have been feasible in the case of the Spanish banks. Finally, we set out the advantages of such a bail-in over a bail-out in the Spanish case. (JEL codes: E30, G21, G32, G33, H63)

Suggested Citation

  • Philipp Bagus & Juan R. Rallo Julián & Miguel A. Alonso Neira, 2014. "Bail-in or Bail-out: The Case of Spain," CESifo Economic Studies, CESifo Group, vol. 60(1), pages 89-106.
    • Handle: RePEc:oup:cesifo:v:60:y:2014:i:1:p:89-106.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifu009
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    Cited by:

    1. Gambacorta, Leonardo & Brei, Michael & Lucchetta, Marcella & Parigi, Bruno, 2020. "Bad bank resolutions and bank lending," CEPR Discussion Papers 14379, C.E.P.R. Discussion Papers.
    2. Mehmet Buyukkara & Ayse Karasoy & Muhammed Islami Onal, 2016. "Assessment of Bail-in for Turkish Banking Sector," CBT Research Notes in Economics 1624, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Abad-González, Julio & Gutiérrez-López, Cristina, 2016. "Modelización de la solvencia bancaria en escenarios adversos: aplicación a los «PIIGS»," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 19(2), pages 227-238.

    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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