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The bail-in credibility: barking dogs seldom bite

Author

Listed:
  • Giulio Velliscig

    (University of Udine)

  • Maurizio Polato

    (University of Udine)

  • Josanco Floreani

    (University of Udine)

  • Enrica Bolognesi

    (University of Udine)

Abstract

This paper studies the senior unsecured bondholders’ bail-in expectations and market monitoring following bail-in legislative events aimed at introducing new tools for subordination. We measure bail-in expectations using a difference in differences approach that compares the reaction to bail-in events of senior unsecured bonds to the reaction of non-bailinable bonds. Similarly, we measure senior unsecured bondholders’ monitoring activity by using a triple differencing analysis that compares the yield-risk sensitivity reaction of senior unsecured bonds with respect to that of non-bailinable bonds. Our results indicate unaffected bail-in expectations by senior unsecured bondholders who, accordingly, do not enhance their pricing of banks’ risk.

Suggested Citation

  • Giulio Velliscig & Maurizio Polato & Josanco Floreani & Enrica Bolognesi, 2024. "The bail-in credibility: barking dogs seldom bite," Journal of Banking Regulation, Palgrave Macmillan, vol. 25(1), pages 1-19, March.
    • Handle: RePEc:pal:jbkreg:v:25:y:2024:i:1:d:10.1057_s41261-022-00210-7
    DOI: 10.1057/s41261-022-00210-7
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    References listed on IDEAS

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